A chart of accounts refers to a system of accounting accounts (each of which takes into account cash flows) that performs an informative role about the state and direction of financial flows in an organization.
Depending on the tasks facing the enterprise, one or another chart of accounts is selected . The most successful solution is considered to be the one that makes it possible to obtain the maximum amount of useful information from the data contained in the statements. The chart of accounts depends on industry specifics (insurance organization, financial institution, private pension fund, small business) and depending on the priority subsystem (there are managerial, tax and international types of accounting). There are also other levels of classification of possible chart of accounts. Today we’ll talk about a phenomenon that is so rare for our country under the name IFRS. The so-called international financial reporting systems were officially recognized in the Russian Federation in accordance with a government decree of 107 at the end of February 2011. Obviously, the adoption of this decree is connected with the entry into the WTO, which helps to blur economic borders. This type of accounting will be useful to the auditor or investor who has decided to analyze information about a foreign organization in order to purchase securities. In the West, the use of the IFRS system of standards for public companies is considered a standard. However, in the United States, the local standard, US GAAP, is still widely used. But since 2010, many large corporations operating on a transnational scale have provided reporting in a new format. Distinguish IFRS under the label IFRS (1 to 8), IAS (of which there are 41 variations), as well as IFRIC (discloses the application of previous standards). Each of them is an instruction for reporting by the financial department.
In its pure form, a specific chart of accounts for accounting according to international reporting standards does not exist, since the set of standards itself is focused solely on reporting for the convenience of investors, and following simple principles. However, on many resources, for the convenience of accountants, a working chart of accounts has been published, adapted to IFRS.
Prepared according to numerous international financial reporting standards , an improved chart of accounts, most often repeats two main reports. This is a statement of comprehensive income as well as a statement of financial position. This structure allows you to get the basic financial parameters in the so-called revolving financial statement. This approach makes it possible to reflect all the articles of the statement of financial position, as well as of total profit. Thus, an investor with even a superficial knowledge of financial management can determine the impact of operations conducted by the organization on reporting, as well as further development trends.
It should be noted that IFRS is not a collection of strict rules governing the chart of accounts of accounting, but rather a flexible reporting system based on only two principles.
1. The so-called accrual method, which means the reflection of operations during their execution. Moreover, it is not allowed to make entries after receipt or payment. This means that all operations are taken into account exactly when they arose (during this period). Following this method provides an opportunity for the auditor, investor or manager to obtain information on all cash receipts and liabilities, and in the future, which allows to predict the outcome of activities for a certain period. If some of the funds have not been received, then a correction is made using the provision for unreliable debt.
2. The principle of business continuity . Assumption that the company will continue operations as soon as possible. And for the reason that the management, shareholders or the relevant commission did not declare the company bankrupt, the assets of the company that reports under IFRS standards will not take into account liquidation expenses. Otherwise, the company's statements must be compiled on a different basis, which should be disclosed.