International Financial Reporting Standards (IFRS)

The International Financial Reporting Standards (IFRS) specify how corporations must manage and disclose their accounts. The International Financial Reporting Standards (IFRS) were established to develop a common accounting language with the purpose of making financial statements comprehensible and consistent across diverse industries and nations. 

A wide range of subjects is covered by the International Financial Reporting Standards (IFRS), such as revenue recognition, income taxes, inventories, fixed assets, business combinations, foreign exchange rates, and the presentation of financial statements. Worldwide, international financial reporting standards are being implemented in a variety of countries and jurisdictions. If you are not in compliance with International Financial Reporting Standards (IFRS), it may be more difficult to obtain investment or commercial loans. By taking a proactive approach to achieving compliance, you may position your company for long-term success.

Did you know?

The major difference between GAAP and IFRS is that IFRS is principle-based, while GAAP is rule-based. Rules-based frameworks are rigid and leave less room for interpretation, while principles-based frameworks are more flexible.

IFRS - Overview

The International Financial Reporting Standards (IFRS) are a set of accounting guidelines that govern how specific types of transactions and events should be represented in financial statements. The International Accounting Standards Board developed them and kept them up to date (IASB). The IASB's goal is for the standards to be implemented consistently around the world so that investors and other financial statement users can compare publicly-traded companies' financial performance to that of their worldwide peers on a like-for-like basis. Over 100 countries, including the European Union and more than two-thirds of the G20, currently utilise the International Financial Reporting Standards (IFRS).

Also Read: Learn About Accounting Principles and Concepts

What Is IFRS?

International financial reporting standards are referred to as IFRS. IFRS is a globally recognised collection of accounting rules that promotes transparency, accountability, and efficiency. The International Financial Reporting Standards (IFRS) are a collection of accounting principles for public firms' financial statements that are designed to make them consistent, transparent, and easily compared around the world.

International Financial Reporting Standards (IFRS) are a collection of accounting principles for financial statements of publicly-traded organisations that are intended to make financial statements of publicly traded companies consistent, transparent, and easily comparable around the world. International Financial Reporting Standards (IFRS) are intended to make financial statements of publicly traded companies consistent, transparent, and easily comparable around the world. The International Financial Reporting Standards (IFRS) now offer complete profiles for 166 different countries in the world. Globally, public organisations are required to comply with the International Financial Reporting Standards (IFRS). This includes all of the member countries of the European Union as well as Canada, India, Russia, South Korea, South Africa, and Chile (IFRS).

IFRS now provides profiles for 166 countries, including those in the European Union. The Generally Accepted Accounting Principles (GAAP) system is used in the United States (GAAP). The International Accounting Standards Board (IASB) is the body that issues the IFRS.

With the development of worldwide shareholding and trade, there is a need of IFRS for standard rules to be applied to the maintenance of books of accounts so that they are comparable, comprehensible, reliable, and useful to internal and external users. The International Financial Reporting Standards (IFRS) system is frequently mistaken with the International Accounting Standards (IAS), which were replaced by IFRS in 2001. 

What Is IASB?

The International Accounting Standards Board (IASB) is a private-sector, independent agency that develops and approves International Financial Reporting Standards (IFRSs). The IFRS Foundation is responsible for overseeing the IASB. In 2001, the International Accounting Standards Board (IASB) was established to replace the International Accounting Standards Committee (IASC). 

The IASB is made up of 14 members from diverse countries with a variety of accounting, financial, and auditing backgrounds. They are a collection of professionals with a combination of standard-setting, accounting, and academic work experience. The Trustees of the IFRS Foundation appoint members through an open and thorough procedure that involves publicising vacancies and engaging with relevant organisations. Every time the members gather, the meeting is broadcasted live so that the public can observe where international accounting standards are headed in the future.

IASB is headquartered in London. It also supplied the 'Conceptual Framework for Financial Reporting,' which was published in September 2010 and provides a conceptual understanding and the foundation for IFRS accounting standards.

Components of Financial Statements Under IFRS

Financial Statement components are the building pieces that come together to produce the Financial Statements and aid in understanding the financial health of a company. The income statement, balance sheet, cash flow statement, and shareholders' equity statement are all included. Each component has a purpose and aids in the understanding of the company's financial situation.

The following should be included in a complete set of financial statements prepared in accordance with the IFRS:

• A balance sheet is a statement of the financial situation at the end of a period.
• A year-end profit and loss statement, as well as a statement of other comprehensive income – other comprehensive income, would comprise those elements of income/expense that are not recorded in the profit and loss account in order to comply with other relevant requirements.

Both of these assertions can be shown together or individually.

• An equity change statement – This would contain a comparison of the amounts shown at the start and end of the year.
• A cash flow statement for the time period
• Financial Statement Notes – containing a review of key accounting policies used and additional supporting information.

In the following instances, the financial statements may also include a statement of the financial position of a prior period:

• When a business uses a retrospective accounting policy;
• When a company's financial statements were restated after the fact; or
• When a company's financial statements are reclassified.

Also Read: Common Accounting Errors – A Practical Guide With Examples

List of International Financial Reporting Standards (IFRS)

The IASB's standards are referred to as IFRS. However, the previous organisation, the IASC, had already established some International Standards known as International Accounting Standards (IAS). Between 1973 and 2001, the IASC granted these IAS. Both the IAS and the IFRS are still in use. The list of IFRS requirements is stated below:

Financial reporting standards are crucial in bringing financial statement reporting to a global standard.  Accounting standards that are globally comparable encourage transparency, accountability, and efficiency in financial markets all across the world. This enhances capital allocation by allowing investors and other market participants to make informed economic judgments about investment possibilities and risks. Universal standards can help organizations with international operations and subsidiaries in different countries save money on reporting and regulatory compliance.

Conclusion

International Financial Reporting Standards (IFRS) is an abbreviation for international financial reporting standards. The set of accounting rules and regulations that govern how accounting events should be reported in your company's financial statements is referred to as the accounting framework. The International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB) with the goal of making financial statements consistent, comparable, and transparent throughout the world. The United States is one famous country that does not adhere to the International Financial Reporting Standards (IFRS), instead of using a system known as GAAP.

Now keep track of your cash flow and manage your incomes and expenses with ease by using the Cashbook app by Khatabook.