A level-readyAll subjects · Accounting · WAC11 The Accounting System and Costing
International Accounting Standards
Edexcel IAL Accounting · WAC11 The Accounting System and Costing
International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) set out how items should be measured and presented. The WAC11 exam uses IAS terms throughout (spec 1.1.10).
What the standards are
Standards are issued by the International Accounting Standards Board (IASB). Older standards are called IAS; newer ones IFRS. Examples you will meet:
- IAS 1 Presentation of financial statements (statement of profit or loss, statement of financial position).
- IAS 2 Inventories: lower of cost and net realisable value.
- IAS 16 Property, plant and equipment: cost, depreciation, revaluation.
- IAS 37 Provisions, contingent liabilities and contingent assets.
- IAS 38 Intangible assets.
IAS terminology
| IAS term (use this) | Older UK term |
|---|---|
| Revenue | Sales / turnover |
| Inventory | Stock |
| Trade receivables | Debtors |
| Trade payables | Creditors |
| Irrecoverable debts | Bad debts |
| Allowance for irrecoverable debts | Provision for doubtful debts |
| Other receivables / other payables | Prepayments / accruals |
| Carrying value | Net book value |
| Statement of profit or loss | Trading and profit and loss account |
| Statement of financial position | Balance sheet |
| Trade receivables ledger control account | Sales ledger control account |
From Appendix 6 of the specification
Evaluating standards
Benefits:
- Comparability: statements from different businesses and countries are prepared the same way.
- Credibility: users trust statements that follow recognised rules.
- Less scope for creative accounting or manipulation.
- Easier for international investors, lenders and multinational groups.
Drawbacks:
- Cost and complexity of compliance, especially for small businesses.
- Standards still allow choices and estimates (depreciation method, useful life, allowance percentages), so profits are not fully comparable.
- One set of rules may not suit every country or business type.
- Standards change, needing retraining.
Worked example
Two competing businesses in different countries both follow IAS. Explain one benefit and one limitation for an investor comparing them.
- Benefit: both use the same measurement and presentation rules, so ratios such as gross margin are more comparable.
- Limitation: each may choose a different depreciation method or useful life, so profit still differs for reasons that are not about performance.
Answer: Comparability improves, but choices and estimates within the standards mean comparisons still need care.
Check yourself
- Which standard deals with the valuation of inventory?
- IAS 16
- IAS 38
- IAS 2
- IAS 37
Show answer
IAS 2. IAS 2 Inventories requires the lower of cost and net realisable value.
- Which standard deals with property, plant and equipment and their depreciation?
- IAS 16
- IAS 2
- IAS 1
- IAS 38
Show answer
IAS 16. IAS 16 Property, plant and equipment.
- What is the IAS term for 'net book value'?
- Residual value
- Fair value
- Carrying value
- Historic cost
Show answer
Carrying value. Carrying value = cost less accumulated depreciation.
- What is the IAS term for 'provision for doubtful debts'?
- Irrecoverable debts
- Allowance for irrecoverable debts
- Other payables
- Trade payables
Show answer
Allowance for irrecoverable debts. The allowance is an estimate; irrecoverable debts are those actually written off.
- Explain one benefit to users of financial statements that are prepared using International Accounting Standards.
Show answer
Because every business follows the same rules, users can compare the statements of different businesses and countries more reliably.. Name the benefit (comparability, credibility) and link it to users.
Sources
Last updated 8 November 2026. Spotted a mistake? Tell us.