Final answer:
In the absence of a specific IFRS standard, companies should use their judgment to develop an accounting policy that provides relevant and reliable financial statements. They should consider existing standards on similar issues, the IFRS Conceptual Framework, and practices of other standard-setting bodies in line with IFRS.
Step-by-step explanation:
Under International Financial Reporting Standards (IFRS), if no standards exist on an accounting issue, companies should refer to the guidance provided by the IFRS Framework. The IFRS Framework serves as a source of principles for the preparation and presentation of financial statements when no specific standard applies.
The IFRS Framework provides conceptual guidance, including definitions, recognition criteria, measurement principles, and disclosure requirements, which companies can apply to address accounting issues where no specific IFRS standard exists.
For example, if a company encounters an accounting issue related to a particular transaction and there is no specific IFRS standard that addresses it, the company should analyze the transaction based on the principles outlined in the IFRS Framework to determine the most appropriate accounting treatment.