What is IFRS, It’s Introduction, Definition, Full Form and other details are provided here. IFRS is short for International Financial Reporting Standards. IFRS is the international accounting framework within which to properly organize and report financial information. It is derived from the pronouncements of the London-based International Accounting Standards Board (IASB). It is currently the required accounting framework in more than 120 countries. Simply, IFRS is like a common global language for business affairs so that company accounts are understandable and comparable across international boundaries.
IFRS requires businesses to report their financial results and financial position using the same rules; this means that, barring any fraudulent manipulation, there is considerable uniformity in the financial reporting of all businesses using IFRS, which makes it easier to compare and contrast their financial results.
IFRS Full Form is International Financial Reporting Standards
What is IFRS ?
International Financial Reporting Standards (IFRS) are a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. IFRS are issued by the International Accounting Standards Board (IASB), and they specify exactly how accountants must maintain and report their accounts. IFRS were established in order to have a common accounting language, so business and accounts can be understood from company to company and country to country.
OBJECTIVES OF IFRS
- To develop, in the public interest, a single set of high quality, understandable and enforceable global accounting standards that require high quality, transparent and comparable information in financial statements and other financial reporting to help participants in the worlds capital markets and other users make economic decisions;
- To promote the use and rigorous application of those standards;
- In fulfilling the objectives associated with (1) and (2), to take account of, as appropriate, the special needs of small and medium-sized entities and emerging economies.
- To bring about convergence of national accounting standards and International Accounting standards and IFRS to high quality solutions.
What are the advantages of converting to IFRS?
By adopting IFRS, a business can present its financial statements on the same basis as its foreign competitors, making comparisons easier. Furthermore, companies with subsidiaries in countries that require or permit IFRS may be able to use one accounting language company-wide. Companies also may need to convert to IFRS if they are a subsidiary of a foreign company that must use IFRS, or if they have a foreign investor that must use IFRS. Companies may also benefit by using IFRS if they wish to raise capital abroad.
IFRS Vs GAAP
IFRS is used primarily by businesses reporting their financial results anywhere in the world except the United States. Generally Accepted Accounting Principles, or GAAP, is the accounting framework used in the United States. GAAP is much more rules-based than IFRS. IFRS focuses more on general principles than GAAP, which makes the IFRS body of work much smaller, cleaner, and easier to understand than GAAP.
Encouraging factors of the use of IFRS
The below are the primary drivers encouraging the use of IFRS globally.
- Globalisation of trade & capital markets
- Rapid development of Information Technology and its impact on operations
- Fast & simplified process of moving funds between countries
- Increased investors interest in foreign investments
Which comes under IFRS ?
IFRS covers a broad array of topics, including:
- Retirement benefit plans
- Business combinations
- Foreign exchange rates
- Borrowing costs
- Income taxes
- Investment in associates
- Fixed assets
- Intangible assets
- Presentation of financial statements
- Revenue recognition
- Employee benefits
- Operating segments
- Subsequent events
- Industry-specific accounting, such as mineral resources and agriculture
What other areas of the profession will IFRS affect?
As IFRS grows in acceptance, most CA (Chartered Accountants)CPAs (USA), financial statement preparers and auditors will have to become knowledgeable about the new rules. Others, such as actuaries and valuation experts who are engaged by management to assist in measuring certain assets and liabilities, are not currently taught IFRS and will have to undertake comprehensive training. Professional associations and industry groups have begun to integrate IFRS into their training materials, publications, testing, and certification programs, and many colleges and universities are including IFRS in their curricula. Some textbooks are already covering IFRS, primarily in a comparative presentation to their instructions on U.S. GAAP. New textbooks covering IFRS are currently being written and should be in circulation in the reasonably near future.