Introduction to IFRS & its Indian Connection.

International Financial Reporting Standards

Background

International Financial Reporting Standards (IFRS) are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are a consequence of growing international shareholding and trade and are particularly important for companies that have dealings in several countries. They are progressively replacing the many different national accounting standards. The rules to be followed by accountants to maintain books of accounts which are comparable, understandable, reliable and relevant as per the users internal or external.

IFRS, with the exception of IAS 29 Financial Reporting in Hyper-inflationary Economies and IFRIC 7 Applying the Restatement Approach under IAS 29, are authorized in terms of the historical cost paradigm. IAS 29 and IFRIC 7 are authorized in terms of the units of constant purchasing power paradigm.

IFRS began as an attempt to harmonize accounting across the European Union but the value of harmonization quickly made the concept attractive around the world. However, it has been debated whether or not de facto harmonization has occurred. Standards that were issued by IASC (the predecessor of IASB) and are still within use today go by the name International Accounting Standards (IAS), while standards issued by IASB are called IFRS. IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC). On 1 April 2001, the new International Accounting Standards Board (IASB) took over from the IASC the responsibility for setting International Accounting Standards. During its first meeting the new Board adopted existing IAS and Standing Interpretations Committee standards (SICs). The IASB has continued to develop standards calling the new standards "International Financial Reporting Standards".

In the absence of a Standard or an Interpretation that specifically applies to a transaction, management must use its judgement in developing and applying an accounting policy that results in information that is relevant and reliable. In making that judgement, IAS 8.11 requires management to consider the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework.

Criticisms of IFRS are 

1.  that they are not being adopted in the US (see GAAP),
2. a number of criticisms from France and
3. that IAS 29 Financial Reporting in Hyperinflationary Economies had no positive effect at all during 6 years in Zimbabwe's hyperinflationary economy. 

The IASB offered responses to the first two criticisms, but has offered no response to the last criticism while IAS 29 is currently (March 2014) being implemented in its original ineffective form in Venezuela and Belarus.

Objective of financial statements

Financial statements are a structured representation of the financial positions and financial performance of an entity. The objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions. Financial statements also show the results of the management's stewardship of the resources entrusted to it.

To meet this objective, financial statements provide information about an entity's:

• assets;
• liabilities;
• equity;
• income and expenses, including gains and losses;
• contributions by and distributions to owners in their capacity as owners; and
• cash flows. 

This information, along with other information in the notes, assists users of financial statements in predicting the entity's future cash flows and, in particular, their timing and certainty.

Feature of IFRS

The following are the general features in IFRS:

• Fair presentation and compliance with IFRS: Fair presentation requires the faithful representation of the effects of the transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the Framework of IFRS.
• Going concern: Financial statements are presented on a going concern basis unless management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.
•  Accrual basis of accounting: An entity shall recognise items as assets, liabilities, equity, income and expenses when they satisfy the definition and recognition criteria for those elements in the Framework of IFRS.
•  Materiality and aggregation: Every material class of similar items has to be presented separately. Items that are of a dissimilar nature or function shall be presented separately unless they are immaterial.
• Offsetting: Offsetting is generally forbidden in IFRS. However certain standards require offsetting when specific conditions are satisfied (such as in case of the accounting for defined benefit liabilities in IAS 19 and the net presentation of deferred tax liabilities and deferred tax assets in IAS 12 ).
• Frequency of reporting: IFRS requires that at least annually a complete set of financial statements is presented. However listed companies generally also publish interim financial statements (for which the accounting is fully IFRS compliant)for which the presentation is in accordance with IAS 34 Interim Financing Reporting.
• Comparative information: IFRS requires entities to present comparative information in respect of the preceding period for all amounts reported in the current period's financial statements. In addition comparative information shall also be provided for narrative and descriptive information if it is relevant to understanding the current period's financial statements. The standard IAS 1 also requires an additional statement of financial position (also called a third balance sheet) when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements. This for example occurred with the adoption of the revised standard IAS 19 (as of 1 January 2013) or when the new consolidation standards IFRS 10-11-12 were adopted (as of 1 January 2013 or 2014 for companies in the European Union).
• Consistency of presentation: IFRS requires that the presentation and classification of items in the financial statements is retained from one period to the next unless: (a) it is apparent, following a significant change in the nature of the entity's operations or a review of its financial statements, that another presentation or classification would be more appropriate having regard to the criteria for the selection and application of accounting policies in IAS 8; or (b) an IFRS standard requires a change in presentation.

Qualitative characteristics of financial statements

Qualitative characteristics of financial statements include:

·         Relevance

·         Faithful representation

Enhancing qualitative characteristics include:

·         Comparability

·         Verifiability

·         Timeliness

·         Understandability

Elements of financial statements

The elements directly related to the measurement of the statement of financial position include:

1.     Asset: An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.

2.   Liability: A liability is a present obligation of the entity arising from the past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits, i.e. assets.

3.     Equity: Nominal equity is the nominal residual interest in the nominal assets of the entity after deducting all its liabilities in nominal value.

The financial performance of an entity is presented in the statement of comprehensive income, which consists of the income statement and the statement of other comprehensive income (usually presented in two separate statements). Financial performance includes the following elements (which are recognised in the income statement or other comprehensive income as required by the applicable IFRS standard).

1.    Revenues: increases in economic benefit during an accounting period in the form of inflows or enhancements of assets, or decrease of liabilities that result in increases in equity. However, it does not include the contributions made by the equity participants (for example owners, partners or shareholders).

2.     Expenses: decreases in economic benefits during an accounting period in the form of outflows, or depletions of assets or incurrences of liabilities that result in decreases in equity. However, these don't include the distributions made to the equity participants.

Results recognised in other comprehensive income are limited to the following specific circumstances:

• Re-measurements of defined benefit assets or liabilities (as defined in the standard IAS 19).
• Increases or decreases in the fair value of financial assets classified as available for sale (with the exception of impairment losses)(as defined in the standard IAS 39).
• Increases or decreases resulting from the application of a revaluation of property, plant and equipment or intangible assets.
• Exchange differences resulting from the translation of foreign operations (subsidiary, associate, joint arrangement or branch of a reporting entity, the activities of which are conducted in a country or currency other than those of the reporting entity) according to the standard IAS 21.
• The portion of the gain or loss on the hedging instrument in a cash flow hedge (or a hedge of a net investment in a foreign operation, as this is accounted similarly) that is determined to be an effective hedge.

The statement of changes in equity consists of a reconciliation of the changes in equity in which the following information is provided:

• total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests;
• for each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with IAS 8; and
• for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from:
• profit or loss;
• other comprehensive income; and
• transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control.

Statement of Cash Flows

1.     Operating cash flows: the principal revenue-producing activities of the entity and are generally calculated by applying the indirect method, whereby profit or loss is adjusted for the effects of transaction of a non-cash nature, any deferrals or accruals of past or future cash receipts or payments, and items of income or expense associated with investing or financing cash flows.

2.   Investing cash flows: the acquisition and disposal of long-term assets and other investments not included in cash equivalents. These represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. Only expenditures that result in a recognised asset in the statement of financial position are eligible for classification as investing activities.

3.     Financing cash flows: activities that result in changes in the size and composition of the contributed equity and borrowings of the entity. These are important because they are useful in predicting claims on future cash flows by providers of capital to the entity.

Notes to the Financial Statements

These shall

• (a) present information about the basis of preparation of the financial statements and the specific accounting policies used;
• (b) disclose the information required by IFRSs that is not presented elsewhere in the financial statements; and 
• (c) provide information that is not presented elsewhere in the financial statements, but is relevant to an understanding of any of them.

Recognition of elements of financial statements

An item is recognized in the financial statements when:

• it is probable future economic benefit will flow to or from an entity.
• the resource can be reliably measured

In some cases specific standards add additional conditions before recognition is possible or prohibit recognition altogether.

An example is the recognition of internally generated brands, mastheads, publishing titles, customer lists and items similar in substance, for which recognition is prohibited by IAS 38. In addition research and development expenses can only be recognised as an intangible asset if they cross the threshold of being classified as 'development cost'.

Whilst the standard on provisions, IAS 37, prohibits the recognition of a provision for contingent liabilities, this prohibition is not applicable to the accounting for contingent liabilities in a business combination. In that case the acquirer shall recognise a contingent liability even if it is not probable that an outflow of resources embodying economic benefits will be required.

Measurement of the elements of financial statements

• Par. 99. Measurement is the process of determining the monetary amounts at which the elements of the financial statements are to be recognized and carried in the balance sheet and income statement. 
• This involves the selection of the particular basis of measurement.
• Par. 100. A number of different measurement bases are employed to different degrees and in varying combinations in financial statements. They include the following:
• Historical cost: Assets are recorded at the amount of cash or cash equivalents paid or the fair value of the consideration given to acquire them at the time of their acquisition. Liabilities are recorded at the amount of proceeds received in exchange for the obligation, or in some circumstances (for example, income taxes), at the amounts of cash or cash equivalents expected to be paid to satisfy the liability in the normal course of business.
• Current cost: Assets are carried at the amount of cash or cash equivalents that would have to be paid if the same or an equivalent asset was acquired currently. Liabilities are carried at the undiscounted amount of cash or cash equivalents that would be required to settle the obligation currently.
• Realisable (settlement) value: Assets are carried at the amount of cash or cash equivalents that could currently be obtained by selling the asset in an orderly disposal. Assets are carried at the present discounted value of the future net cash inflows that the item is expected to generate in the normal course of business. Liabilities are carried at the present discounted value of the future net cash outflows that are expected to be required to settle the liabilities in the normal course of business.
• Par. 101. The measurement basis most commonly adopted by entities in preparing their financial statements is historical cost. This is usually combined with other measurement bases. For example, inventories are usually carried at the lower of cost and net realisable value, marketable securities may be carried at market value and pension liabilities are carried at their present value. Furthermore, some entities use the current cost basis as a response to the inability of the historical cost accounting model to deal with the effects of changing prices of non-monetary assets.

Concepts of capital and capital maintenance

Concepts of capital

• Par. 102. A financial concept of capital is adopted by most entities in preparing their financial statements. Under a financial concept of capital, such as invested money or invested purchasing power, capital is synonymous with the net assets or equity of the entity. Under a physical concept of capital, such as operating capability, capital is regarded as the productive capacity of the entity based on, for example, units of output per day.
• Par. 103. The selection of the appropriate concept of capital by an entity should be based on the needs of the users of its financial statements. Thus, a financial concept of capital should be adopted if the users of financial statements are primarily concerned with the maintenance of nominal invested capital or the purchasing power of invested capital. If, however, the main concern of users is with the operating capability of the entity, a physical concept of capital should be used. The concept chosen indicates the goal to be attained in determining profit, even though there may be some measurement difficulties in making the concept operational.

Concepts of capital maintenance and the determination of profit

• Par. 104. The concepts of capital in paragraph 102 give rise to the following two concepts of capital maintenance:

• Financial capital maintenance. Under this concept a profit is earned only if the financial (or money) amount of the net assets at the end of the period exceeds the financial (or money) amount of net assets at the beginning of the period, after excluding any distributions to, and contributions from, owners during the period. Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power.

• Physical capital maintenance. Under this concept a profit is earned only if the physical productive capacity (or operating capability) of the entity (or the resources or funds needed to achieve that capacity) at the end of the period exceeds the physical productive capacity at the beginning of the period, after excluding any distributions to, and contributions from, owners during the period.

The concepts of capital in paragraph 102 give rise to the following three concepts of capital during low inflation and deflation:

• (1) Physical capital.
• (2) Nominal financial capital.
• (3) Constant item purchasing power financial capital.

The concepts of capital in paragraph 102 give rise to the following three concepts of capital maintenance during low inflation and deflation:

1.     Physical capital maintenance: optional during low inflation and deflation. Current Cost Accounting model prescribed by IFRS. (See Par 106).

2. Financial capital maintenance in nominal monetary units (Historical cost accounting): authorized by IFRS but not prescribed—optional during low inflation and deflation. (See Par 104 (a) Historical cost accounting). Financial capital maintenance in nominal monetary units per se during inflation and deflation is a fallacy: it is impossible to maintain the real value of financial capital constant with measurement in nominal monetary units per se during inflation and deflation.

3.  Financial capital maintenance in units of constant purchasing power (Capital Maintenance in Units of Constant Purchasing Power): authorized by IFRS but not prescribed—optional during low inflation and deflation. (See Par 104(a)). Capital Maintenance in Units of Constant Purchasing Power is prescribed during hyperinflation in IAS 29, i.e. the restatement of Historical Cost or Current Cost period-end financial statements in terms of the period-end monthly published Consumer Price Index. Only financial capital maintenance in units of constant purchasing power (Capital Maintenance in Units of Constant Purchasing Power) in terms of a daily index per se can automatically maintain the real value of financial capital constant at all levels of inflation and deflation in all entities that at least break even in real value—ceteris paribus—for an indefinite period of time. This would happen whether these entities own revaluable fixed assets or not and without the requirement of more capital or additional retained profits to simply maintain the existing constant real value of existing shareholders' equity constant. Financial capital maintenance in units of constant purchasing power requires the calculation and accounting of net monetary losses and gains from holding monetary items during low inflation and deflation. The calculation and accounting of net monetary losses and gains during low inflation and deflation have thus been authorized in IFRS since 1989.

• Par. 105: The concept of capital maintenance is concerned with how an entity defines the capital that it seeks to maintain. It provides the linkage between the concepts of capital and the concepts of profit because it provides the point of reference by which profit is measured; it is a prerequisite for distinguishing between an entity's return on capital and its return of capital; only inflows of assets in excess of amounts needed to maintain capital may be regarded as profit and therefore as a return on capital. Hence, profit is the residual amount that remains after expenses (including capital maintenance adjustments, where appropriate) have been deducted from income. If expenses exceed income the residual amount is a loss.
• Par. 106: The physical capital maintenance concept requires the adoption of the current cost basis of measurement. The financial capital maintenance concept, however, does not require the use of a particular basis of measurement. Selection of the basis under this concept is dependent on the type of financial capital that the entity is seeking to maintain.
• Par. 107: The principal difference between the two concepts of capital maintenance is the treatment of the effects of changes in the prices of assets and liabilities of the entity. In general terms, an entity has maintained its capital if it has as much capital at the end of the period as it had at the beginning of the period. Any amount over and above that required to maintain the capital at the beginning of the period is profit.
• Par. 108: Under the concept of financial capital maintenance where capital is defined in terms of nominal monetary units, profit represents the increase in nominal money capital over the period. Thus, increases in the prices of assets held over the period, conventionally referred to as holding gains, are, conceptually, profits. They may not be recognised as such, however, until the assets are disposed of in an exchange transaction. When the concept of financial capital maintenance is defined in terms of constant purchasing power units, profit represents the increase in invested purchasing power over the period. Thus, only that part of the increase in the prices of assets that exceeds the increase in the general level of prices is regarded as profit. The rest of the increase is treated as a capital maintenance adjustment and, hence, as part of equity.
• Par. 109: Under the concept of physical capital maintenance when capital is defined in terms of the physical productive capacity, profit represents the increase in that capital over the period. All price changes affecting the assets and liabilities of the entity are viewed as changes in the measurement of the physical productive capacity of the entity; hence, they are treated as capital maintenance adjustments that are part of equity and not as profit.
• Par. 110: The selection of the measurement bases and concept of capital maintenance will determine the accounting model used in the preparation of the financial statements. Different accounting models exhibit different degrees of relevance and reliability and, as in other areas, management must seek a balance between relevance and reliability. This Framework is applicable to a range of accounting models and provides guidance on preparing and presenting the financial statements constructed under the chosen model. At the present time, it is not the intention of the Board of IASC to prescribe a particular model other than in exceptional circumstances, such as for those entities reporting in the currency of a hyperinflationary economy. This intention will, however, be reviewed in the light of world developments.

Requirements

IFRS financial statements consist of (IAS1.8)

1.     a Statement of Financial Position

2.     a Statement of Comprehensive Income separate statements comprising an Income Statement and separately a Statement of Comprehensive Income, which reconciles Profit or Loss on the Income statement to total comprehensive income

3.     a Statement of Changes in Equity (SOCE)

4.     a Cash Flow Statement or Statement of Cash Flows

5.     notes, including a summary of the significant accounting policies

Comparative information is required for the prior reporting period (IAS 1.36). An entity preparing IFRS accounts for the first time must apply IFRS in full for the current and comparative period although there are transitional exemptions (IFRS1.7).

On 6 September 2007, the IASB issued a revised IAS 1 Presentation of Financial Statements. The main changes from the previous version are to require that an entity must:

• present all non-owner changes in equity (that is, 'comprehensive income' ) either in one Statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). Components of comprehensive income may not be presented in the Statement of changes in equity.
• present a statement of financial position (balance sheet) as at the beginning of the earliest comparative period in a complete set of financial statements when the entity applies the new standard.
• present a statement of cash flow.
• make necessary disclosure by the way of a note.

*The revised IAS 1 is effective for annual periods beginning on or after 1 January 2009. Early adoption is permitted.

Criticisms of IFRS

1.     The US Securities and Exchange Commission Staff issued a 127-page report stating reasons why not to adopt IFRS in the United States.The staff of the IFRS Foundation provided a detailed answer on the main criticisms in the SEC report.

2.     A number of criticisms were voiced in the beginning of 2013 in the French media to which the IASB Board member Philippe DANJOU responded in his document 'AN UPDATE ON INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs).

3.     It is widely acknowledged that IAS 29 Financial Reporting in Hyperinflationary Economies had no positive effect during the six years it was implemented during hyperinflation in Zimbabwe. This leads people to ask what the purpose of IAS 29 is when it had no positive effect during hyperinflation in Zimbabwe. IAS 29 is currently (March 2015) being implemented in its original ineffective form in Venezuela and Belarus. It was suggested to the IASB in 2012 that IAS 29 should be corrected to require daily indexation which would result in effective Capital Maintenance in Units of Constant Purchasing Power (CMUCPP) and would stabilize the non-monetary economy during hyperinflation. The IASB has offered no response to date (March 2015) to this criticism and has not yet corrected IAS 29 to require daily indexation.

Adoption in India

The Institute of Chartered Accountants of India (ICAI) had earlier announced that IFRS will be mandatory in India for financial statements for the periods beginning on or after 1 April 2012, but this plan had failed. The revised roadmap recommends Ind AS to be implemented for the preparation of Consolidated Financial Statements of listed companies and unlisted companies having net worth in excess of Rupees 500 crore from the accounting year beginning on or after 1st April, 2016, with previous year comparatives in Ind AS for the year 2015-16. The stand-alone financial statements will continue to be prepared as per the existing notified Accounting Standards which would be upgraded over a period of time. However, there is no clear new date of adoption of IFRS.

Reserve Bank of India had earlier stated that financial statements of banks need to be IFRS-compliant for periods beginning on or after 1 April 2011. However, this has not been made applicable as yet.

The ICAI had earlier prepared a phase wise applicability details for different companies in India:

• Phase 1: Opening balance sheet as at 1 April 2011*

1.     Companies which are part of NSE Index – Nifty 50

2.     Companies which are part of BSE Index – Sensex 30

1.     Companies whose shares or other securities are listed on a stock exchange outside India

2.     Companies, whether listed or not, having net worth of more than INR 1000 crore (INR 10 billion)

• Phase 2: Opening balance sheet as at 1 April 2012*

Companies not covered in phase 1 and having net worth exceeding INR 500 crore (INR 5 billion)

• Phase 3: Opening balance sheet as at 1 April 2014*

Listed companies not covered in the earlier phases * If the financial year of a company commences at a date other than 1 April, then it shall prepare its opening balance sheet at the commencement of immediately following financial year.

On 22 January 2010, the Ministry of Corporate Affairs issued the road map for transition to IFRS. It was clear that India had deferred transition to IFRS by a year. In the first phase, companies included in Nifty 50 or BSE Sensex, and companies whose securities are listed on stock exchanges outside India and all other companies having net worth of INR 10 billion will prepare and present financial statements using Indian Accounting Standards converged with IFRS. According to the press note issued by the government, those companies will convert their first balance sheet as at 1 April 2011, applying accounting standards convergent with IFRS if the accounting year ends on 31 March. This implies that the transition date will be 1 April 2011. According to the earlier plan, the transition date was fixed at 1 April 2010.

Transition in phases- The present situation.

Companies, whether listed or not, having net worth of more than INR 5 billion will convert their opening balance sheet as at 1 April 2016. Listed companies having net worth of INR 5 billion or less will convert their opening balance sheet as at 1 April 2016. Un-listed companies having net worth of Rs5 billion or less will continue to apply existing accounting standards, which might be modified from time to time. Transition to IFRS in phases is a smart move.
The transition cost for smaller companies will be much lower because large companies will bear the initial cost of learning and smaller companies will not be required to reinvent the wheel. However, this will happen only if a significant number of large companies engage Indian accounting firms to provide them support in their transition to IFRS. If, most large companies, which will comply with Indian accounting standards convergent with IFRS in the first phase, choose one of the international firms, Indian accounting firms and smaller companies will not benefit from the learning in the first phase of the transition to IFRS.
It is likely that international firms will protect their learning to retain their competitive advantage. Therefore, it is for the benefit of the country that each company makes judicious choice of the accounting firm as its partner without limiting its choice to international accounting firms. Public sector companies should take the lead and the Institute of Chartered Accountants of India (ICAI) should develop a clear strategy to diffuse the learning.

Size of companies

The government has decided to measure the size of companies in terms of net worth. This is not the ideal unit to measure the size of a company. Net worth in the balance sheet is determined by accounting principles and methods. Therefore, it does not include the value of intangible assets. Moreover, as most assets and liabilities are measured at historical cost, the net worth does not reflect the current value of those assets and liabilities. Market capitalisation is a better measure of the size of a company. But it is difficult to estimate market capitalisation or fundamental value of unlisted companies. This might be the reason that the government has decided to use 'net worth' to measure size of companies. Some companies, which are large in terms of fundamental value or which intend to attract foreign capital, might prefer to use Indian accounting standards convergent with IFRS earlier than required under the road map presented by the government. The government should provide that choice.

-Compiled from various sources by Ketan Kapoor. Comments on the article are invited in the comments section. 

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21 Hot Favorite Interview Questions for CA Firms Interviews

If you're planning to interview with one of the four largest accounting firms in the world, i.e E&Y, Deloitte, PWC & KPMG, you better have answers prepared for these 21:

1. What accomplishment are you most proud of?

2. What types of challenges have you faced in the past two years and how did you overcome them?

3. Give me an example of how you successfully dealt with someone who was difficult.

4. Give me an example of how one of your strengths has benefited you when working in a team environment.

5. Why do you want to work at this firm specifically?

6. Why are you interested in this particular area of the firm?

7. Give me an example of a time you failed.

8. Give me an example of a time you succeeded.

9. What’s the most difficult thing you’ve ever had to do?

10. Give me examples of how well you work under pressure.

11. What are you looking to get out of a job/internship with a public accounting firm?

12. What are your thoughts on the increase demand of quality by the PCAOB [Public Company Accounting Oversight Board] and how would you implement such demands in your audit?

13. Tell me about yourself.

14. How would you describe your leadership skills?

15. Give me a situation in your past work or school experience where you demonstrated problem-solving skills.

16. Where do you see yourself in five years? Ten years?

17. Tell me about a time when you had an idea but your team was not willing to accept it. How did you go about presenting this idea and trying to persuade them to accept it?

18. What did you learn from your last job/internship?

19. Describe some situations where you’ve had to use technical writing skills.

20. Why should I hire you?

21. What makes you stand out?

-Compiled from various sources by Ketan Kapoor,

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44 Tips for an Effective Resume

44 Resume Writing Tips

Having a solid and effective resume can greatly improve your chances of landing that dream job. That is beyond discussion. How does one make sure that his resume is top notch and bullet proof, however? There are several websites with tips around the web, but most bring just a handful of them. We wanted to put them all together in a single place, and that is what you will find below: 44 resume writing tips.

 

1. Know the purpose of your resume

Some people write a resume as if the purpose of the document was to land a job. As a result they end up with a really long and boring piece that makes them look like desperate job hunters. The objective of your resume is to land an interview, and the interview will land you the job (hopefully!).

2. Back up your qualities and strengths

Instead of creating a long (and boring) list with all your qualities (e.g., disciplined, creative, problem solver) try to connect them with real life and work experiences. In other words, you need to back these qualities and strengths up, else it will appear that you are just trying to inflate things.

3. Make sure to use the right keywords

Most companies (even smaller ones) are already using digital databases to search for candidates. This means that the HR department will run search queries based on specific keywords. Guess what, if your resume doesn’t have the keywords related to the job you are applying for, you will be out even before the game starts. These keywords will usually be nouns. Check the job description and related job ads for a clue on what the employer might be looking for.

4. Use effective titles

Like it or not, employers will usually make a judgment about your resume in 5 seconds. Under this time frame the most important aspect will be the titles that you listed on the resume, so make sure they grab the attention. Try to be as descriptive as possible, giving the employer a good idea about the nature of your past work experiences. For example:

Bad title: Accounting

Good title: Management of A/R and A/P and Recordkeeping

5. Proofread it twice

It would be difficult to emphasize the importance of proofreading your resume. One small typo and your chances of getting hired could slip. Proofreading it once is not enough, so do it twice, three times or as many as necessary. 

6. Use bullet points

No employer will have the time (or patience) to read long paragraphs of text. Make sure, therefore, to use bullet points and short sentences to describe your experiences, educational background and professional objectives.

7. Where are you going?

Including professional goals can help you by giving employers an idea of where you are going, and how you want to arrive there. You don’t need to have a special section devoted to your professional objectives, but overall the resume must communicate it. The question of whether or not to highlight your career objectives on the resume is a polemic one among HR managers, so go with your feeling. If you decide to list them, make sure they are not generic.

8. Put the most important information first

This point is valid both to the overall order of your resume, as well as to the individual sections. Most of the times your previous work experience will be the most important part of the resume, so put it at the top. When describing your experiences or skills, list the most important ones first.

9. Attention to the typography

First of all make sure that your fonts are big enough. The smaller you should go is 11 points, but 12 is probably safer. Do not use capital letters all over the place, remember that your goal is to communicate a message as fast and as clearly as possible. Arial and Times are good choices.

10. Do not include “no kidding” information

There are many people that like to include statements like “Available for interview” or “References available upon request.” If you are sending a resume to a company, it should be a given that you are available for an interview and that you will provide references if requested. Just avoid items that will make the employer think “no kidding!”

11. Explain the benefits of your skills

Merely stating that you can do something will not catch the attention of the employer. If you manage to explain how it will benefit his company, and to connect it to tangible results, then you will greatly improve your chances.

12. Avoid negativity

Do not include information that might sound negative in the eyes of the employer. This is valid both to your resume and to interviews. You don’t need to include, for instance, things that you hated about your last company.

13. Achievements instead of responsibilities

Resumes that include a long list of “responsibilities included…” are plain boring, and not efficient in selling yourself. Instead of listing responsibilities, therefore, describe your professional achievements.

14. No pictures

Sure, we know that you are good looking, but unless you are applying for a job where the physical traits are very important (e.g., modeling, acting and so on), and unless the employer specifically requested it, you should avoid attaching your picture to the resume. This is where most of us commit the biggest mistake.

15. Use numbers

This tip is a complement to the 13th one. If you are going to describe your past professional achievements, it would be a good idea to make them as solid as possible. Numbers are your friends here. Don’t merely mention that you increased the annual revenues of your division, say that you increased them by $100,000, by 78%, and so on.

16. One resume for each employer

One of the most common mistakes that people make is to create a standard resume and send it to all the job openings that they can find. Sure it will save you time, but it will also greatly decrease the chances of landing an interview (so in reality it could even represent a waste of time). Tailor your resume for each employer. The same point applies to your cover letters.

17. Identify the problems of the employer

A good starting point to tailor your resume for a specific employer is to identify what possible problems he might have at hand. Try to understand the market of the company you are applying for a job, and identify what kind of difficulties they might be going through. After that illustrate on your resume how you and your skills would help to solve those problems.

18. Avoid age discrimination

It is illegal to discriminate people because of their age, but some employers do these considerations nonetheless. Why risk the trouble? Unless specifically requested, do not include your age on your resume.

19. You don’t need to list all your work experiences

If you have job experiences that you are not proud of, or that are not relevant to the current opportunity, you should just omit them. Mentioning that you used to sell hamburgers when you were 17 is probably not going to help you land that executive position.

20. Go with what you got

If you never had any real working experience, just include your summer jobs or volunteer work. If you don’t have a degree yet, mention the title and the estimated date for completion. As long as those points are relevant to the job in question, it does not matter if they are official or not.

21. Sell your fish

Remember that you are trying to sell yourself. As long as you don’t go over the edge, all the marketing efforts that you can put in your resume (in its content, design, delivery method and so on) will give you an advantage over the other candidates.

22. Don’t include irrelevant information

Irrelevant information such as political affiliation, religion and sexual preference will not help you. In fact it might even hurt your chances of landing an interview. Just skip it.

23. Use Mr. and Ms. if appropriate

If you have a gender neutral name like Alex or Ryan make sure to include the Mr. or Ms. prefix, so that employers will not get confused about your gender.

24. No lies, please

Seems like a no brainer, but you would be amused to discover the amount of people that lie in their resumes. Even small lies should be avoided. Apart from being wrong, most HR departments do background checks these days, and if you are buster it might ruin your credibility for good.

25. Keep the salary in mind

The image you will create with your resume must match the salary and responsibility level that you are aiming for.

26. Analyze job ads

You will find plenty of useful information on job ads. Analyze no only the ad that you will be applying for, but also those from companies on the same segment or offering related positions. You should be able to identify what profile they are looking for and how the information should be presented.

27. Get someone else to review your resume

Even if you think you resume is looking kinky, it would be a good idea to get a second and third opinion about it. We usually become blind to our own mistakes or way of reasoning, so another people will be in a good position to evaluate the overall quality of your resume and make appropriate suggestions.

28. One or two pages

The ideal length for a resume is a polemic subject. Most employers and recruiting specialists, however, say that it should contain one or two pages at maximum. Just keep in mind that, provided all the necessary information is there, the shorter your resume, the better.

29. Use action verbs

A very common advice to job seekers is to use action verbs. But what are they? Action verbs are basically verbs that will get noticed more easily, and that will clearly communicate what your experience or achievement were. Examples include managed, coached, enforced and planned. 

30. Use a good printer

If you are going to use a paper version of your resume, make sure to use a decent printer. Laser printers usually get the job done. Plain white paper is the preferred one as well or you can use white bond paper.

31. No hobbies

Unless you are 100% sure that some of your hobbies will support you candidacy, avoid mentioning them. I know you are proud of your swimming team, but share it with your friends and not with potential employers.

32. Update your resume regularly

It is a good idea to update your resume on a regular basis. Add all the new information that you think is relevant, as well as courses, training programs and other academic qualifications that you might receive along the way. This is the best way to keep track of everything and to make sure that you will not end up sending an obsolete document to the employer.

33. Mention who you worked with

If you have reported or worked with someone that is well known in your industry, it could be a good idea to mention it on the resume. The same thing applies to presidents and CEOs. If you reported to or worked directly with highly ranked executives, add it to the resume.

34. No scattered information

Your resume must have a clear focus. If would cause a negative impression if you mentioned that one year you were studying drama, and the next you were working as an accountant. Make sure that all the information you will include will work towards a unified image. Employers like decided people.

35. Make the design flow with white space

Do not jam your resume with text. Sure we said that you should make your resume as short and concise as possible, but that refers to the overall amount of information and not to how much text you can pack in a single sheet of paper. White space between the words, lines and paragraphs can improve the legibility of your resume.

36. Lists all your positions

If you have worked a long time for the same company (over 10 years) it could be a good idea to list all the different positions and roles that you had during this time separately. You probably had different responsibilities and developed different skills on each role, so the employer will like to know it.

37. No jargon or slang

It should be common sense, but believe me, it is not. Slang should never be present in a resume. As for technical jargon, do not assume that the employer will know what you are talking about. Even if you are sending your resume to a company in the same segment, the person who will read it for the first time might not have any technical expertise.

38. Careful with sample resume templates

There are many websites that offer free resume templates. While they can help you to get an idea of what you are looking for, do not just copy and paste one of the most used ones. You certainly don’t want to look just like any other candidate, do you?

39. Create an email proof formatting

It is very likely that you will end up sending your resume via email to most companies. Apart from having a Word document ready to go as an attachment, you should also have a text version of your resume that does not look disfigured in the body of the email or in online forms. Attachments might get blocked by spam filters, and many people just prefer having the resume on the body of the email itself.

40. Remove your older work experiences

If you have been working for 20 years or more, there is no need to have 2 pages of your resume listing all your work experiences, starting with the job at the local coffee shop at the age of 17! Most experts agree that the last 15 years of your career are enough.

41. No fancy design details

Do not use a colored background, fancy fonts or images on your resume. Sure, you might think that the little flowers will cheer up the document, but other people might just throw it away at the sight.

42. No pronouns

You resume should not contain the pronouns “I” or “me.” That is how we normally structure sentences, but since your resume is a document about your person, using these pronouns is actually redundant.

43. Don’t forget the basics

The first thing on your resume should be your name. It should be bold and with a larger font than the rest of the text. Make sure that your contact details are clearly listed. Secondly, both the name and contact details should be included on all the pages of the resume (if you have more than one).

44. Consider getting professional help

If you are having a hard time to create your resume, or if you are receiving no response whatsoever from companies, you could consider hiring a professional resume writing service. There are both local and online options are available, and usually the investment will be worth the money.

-Ketan Kapoor

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