International Accounting Standards (IAS) — common mistakes

In Paper 3, you won't be asked to just list the provisions of a standard. Instead, you'll be given a scenario in a trial balance or additional information and expected to apply the correct accounting treatment. For example, information about a lawsuit will require you to apply IAS 37 to decide if a provision is needed, or details on development costs will test your knowledge of IAS 38 capitalisation criteria.

International Accounting Standards (IAS) were issued by the predecessor body, the International Accounting Standards Committee (IASC), between 1973 and 2001. The International Accounting Standards Board (IASB) replaced the IASC in 2001 and now issues International Financial Reporting Standards (IFRS). Existing IASs that have not been replaced by IFRSs remain in force. For your exam, you need to know the specific IASs listed in the syllabus.

The LIFO (Last-In, First-Out) method is not permitted because it often does not faithfully represent the actual physical flow of inventory, especially for non-perishable goods. It can also distort profit figures during periods of rising prices by matching the most recent (higher) costs against revenue, leading to lower reported profits and an outdated inventory valuation on the statement of financial position.

While it is helpful to know the numbers to show the examiner you understand the source of the accounting rule (e.g., 'In accordance with IAS 16...'), it is far more important to understand and be able to apply the principles and rules of each standard. Marks are awarded for the correct application, not for memorising the number.