General considerations on IFRS application ((IAS 32, IAS 39 şi IFRS 7) in the financial instruments area

Author:Univ. prof., PhD Elena DOBRE

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Keywords:fair value, amortized cost, effective interest rate, recognition, measurement

Abstract:
Along with the financial markets globalization appeared a need for an unitary accounting treatment and of some standards for unitary financial information worldwide. this was the start of developing the International Accounting Standards – IAS and later on the IFRS. The main concepts in the accounting measurement and treatments of the financial instruments are fair value, amortized cost and effective interest rate. \r\n\r\nFair value represents the amount for which an asset could be changed or a liability could be settled between two knowledgeable contractual parties in an arm length transaction. \r\n\r\nThe amortized cost – the amount an asset or a liability is measured from its initial accounting, diminished with the principal reimbursements, adjusted with the difference between the interests calculated using the effective interest rate method and the interests actually received or paid and diminished with the discounts for depreciations or for irrecoverable losses. \r\n\r\nEffective interest rate - the rate which update with accuracy the increases or decreasing of future cash flows during the financial instrument expected life time . \r\n\r\nBasic hypothesis in IAS/IFRS application are: Management accounting (hypothesis according which the effect of the transactions or of other event are accounted when they are produced and not when they are paid through transfers or when the cash or cash equivalents are received) and Going concerns (hypothesis according to which the entity will continue its activities in a foreseeable future. \r\n\r\nThe qualitative characteristics of the accounting information are: intelligibility (quality which makes the financial information to be easily understood by the users) pertinence, (quality that influences the economic decisions made by users when they assess past, recent or future events or when confirming the past measurements), reliability (quality of the financial information by which the lack of errors confers credibility in presenting a fair value), comparability (quality that allows the users to analyze in time 9at the same entity) and in space (in comparison with other entities) the information provided in the financial statements in order to identify the trends of the financial situation/position and the entity performances).

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