The importance of professional judgement applied in the context of the International Financial Reporting Standards

Abstract

Guidance has always been welcome in terms of applying professional judgement in the context of the principles-based accounting standards -International Financial Reporting Standards. This fact is the result of the complexity and diversity of some situations, which might give rise to difficulties in terms of choosing the appropriate accounting policies and methods (depreciation, inventory valuation on hand at the end of an accounting period, the recognition of revenues and expenses from a construction contract, accounting for lease contracts by the proper determination of the type of lease: financing or operating), and respectively the need to verify if the criteria set by the principles-based accounting standards are met. This "freedom" of choice and disclosure might create problems in terms of accounting information quality. The possibility to select accounting methods based on the Standards' provisions is meant to generate a true and fair view of the company's financial position and financial performance.In these cases it is recommended to use professional judgement in order to reach a conclusion which is in accordance with the accounting principles and is not enforced by any accounting rules, since the exercise of individual professional judgement is preferred against the "pure" compliance with prescriptive legal requirements.

A Conceptual Framework for Assessing the Application of Artificial Intelligence for Financial Reporting

“…According to Ivan's [18] research, the principles-based accounting framework allows for the use of professional judgement, allowing the freedom to choose appropriate accounting concepts/policies in each situation. Because the economic substance of transactions can be faithfully represented, it better serves the needs of business, markets, and the public interest [19].…”

“…Due to the similarities between auditing and financial reporting, this study adapted, analyzed, and evaluated some of those assessments in the context of the financial reporting process.  Two of these papers [18] and [20] discuss the issues related to accounting estimates and professional judgement. These discussions take place in the context of the role and importance of accounting estimates and professional judgement in financial report preparation.…”

The influence of professional judgment on the use of elements of the accounting method under the application of IFRS

“…Researcher of [1] believes that the possibility of choosing accounting methods based on IFRS aims to form a true and fair view of the company's financial condition and financial results. In these cases, it is recommended to use professional judgment in order to reach a conclusion that is consistent with accounting principles and is not supported by any accounting standards, as the application of individual professional judgment is preferable to compliance with legal requirements.…”

The Effect of Using Professional Judgment on Fair Value Accounting

“…Birçok durumda uygun değer ile ilgili en önemli sorun, raporlamada kullanılan tahminlerin denetimi ve bu tahminlerin doğrulanabilir olup olmadığıdır. Mesleki yargı açısından değer kavramını tanımlama veya bir muhasebe kaleminin değerini belirleme açısından, yerine koyma değeri, net gerçekleşebilir değer, geri kazanılabilir değeri, gerçeğe uygun değer gibi birden fazla anlama sahip olabilir (Ivan, 2016(Ivan, : 1131. Ayrıca fırsatçı ve dürüst olmayan yönetim tarafından kazanç sağlamak amacıyla yargı ve varsayımların manipüle edebilmektedir.…”