How can one approach towards understanding the interaction between accounting standards?
Understanding the interaction between accounting standards requires a systematic approach and a deep understanding of each standard individually and how they interrelate. Here are some steps that can be followed:
- Learn Each Standard Individually: Start by thoroughly understanding each accounting standard separately. Know what each standard covers, its principles, and how it is applied in practice.
- Understand the Scope: Identify where the standards might overlap in scope. For instance, both IFRS 15 (Revenue from Contracts with Customers) and IFRS 9 (Financial Instruments) might apply to a contract involving both a sale of goods and a financing component.
- Analyze Transactions: When looking at a particular transaction, consider all the possible standards that might apply. Then, analyze the transaction under each of these standards.
- Case Studies and Examples: Use case studies and real-world examples to understand how standards interact in practice. This could be from textbooks, educational resources, or experiences in the workplace.
- Consult Guidance: Use guidance from standard-setters and regulatory authorities. Many such bodies issue guidance on how to apply standards in certain complex situations.
- Use of Technology: Use accounting software that is designed to handle the interaction of various accounting standards. Such software typically comes with guidance and alerts to ensure the correct application of standards.
- Continuous Learning: Changes in standards and regulatory guidance can affect how standards interact. Therefore, keep yourself updated on the latest changes and developments.
- Seek Expert Advice: In case of complicated scenarios where multiple standards might interact, don't hesitate to seek advice from accounting experts or consultants who specialize in those areas.
By following these steps, you can develop a better understanding of how accounting standards interact, and how to apply them correctly in a variety of scenarios.