IFRS- International Financial Reporting Standard The Global Accounting Language

 

IFRS-International Financial Reporting Standard

 

The finance and accounting profession is emerging as a fast-growing profession. While, General Accepted Accounting Principles (GAAP) are becoming less prevalent and IFRSs are gaining momentum worldwide. These standards have 

The worldwide acceptance of these international standards has created a potential demand for the IFRS professionals. The companies prefer to recruit those candidates who are having an expertise in these international standards apart from their normal specialization in finance and accounting. Thus, creating a huge demand for IFRS professionals.

The proficiency in these international standards is highly recommended for Chief Accountant, Chief Financial Officer, Finance Managers, Bank Managers, Financial Controllers, Accountants, Financial Analyst, Auditors and Portfolio Managers.




Let’s get a detailed knowledge about IFRS basic.

IFRS full form International Financial Reporting Standard. It is a set of accounting rules for the financial statements of public companies that are intended to make them consistent, transparent, and easily comparable around the world. IFRS is required to be used by public companies based in 167 jurisdictions, including all the nations in the European Union as well as Canada, India, Russia, South Korea, South Africa, and Chile. The U.S. and China each have their own system.

  • It is issued by IASB (International Accounting Standard Board) which replaced the IAS in 2001.
  • IFRS originated in the European Union with the intention of making business affairs and accounts accessible across the continent. It was quickly adopted as a common accounting language.
  • Although the U.S. and some other countries do not use IFRS, currently 167 jurisdictions do, making IFRS the most-used set of standards globally.

The need for IFRS arise due to:

1.    All countries want to promote and attract foreign investment for nation growth.
2.    Eliminating different reporting for companies having offices in more than  one country.
3.    Improved quality and comparability of Financial Reporting.
4.    It is also Globally Accepted Principles.
5.    It helps in improving cross border trade and investment.

IFRS compliant in 2 ways:

  • 1.    IFRS adopt means to adopt IFRS as it is.
  • 2.    IFRS converge means there can be a modification in IFRS but should follow IASB. India has adopted IFRS converge.

IFRS works on basic principles clarity, comparability, relevance, and reliability.

There is difference between GAAP and IFRS.

·       GAAP are used in US which is rules-based while IFRS are Globally Accepted Principles which is principles-based. GAAP lists assets in decreasing order of liquidity while IFRS lists in increasing order of liquidity.

·       In US GAAP all property is included in category of Property, Plant and Equipment (PPE), while in IFRS when property is held for rental income or capital appreciation the property is separated from PPE as Investment Property.

·       In US GAAP both Last-In-first-Out (LIFO) and First-In-First-Out (FIFO) costing methods are allowed, while in IFRS only FIFO is allowed as it does not represent the physical flow of goods.




·       Both Fixed Assets and Intangible Assets are reported in Cost as per US GAAP, while in IFRS they are valued at fair Value and it requires separate depreciation process for separable components of PPE, while US GAAP does not allow such aggregations.

·       There is also difference in terminology, for e.g.
Ø In case of US GAAP Restatements refers to corrections of errors, not retrospective adjustments but in case of IFRS it refers to corrections of errors and retrospective adjustments.

Ø Investments with significant influence (If an investor holds at least 20 percent of the voting power of an investee) refers to Equity method investees in case of US GAAP while in case of IFRS it refers to Associates.

Ø In case of US GAAP Joints arrangements are only referred as joint ventures, while in case of IFRS they are referred as joint ventures or joint operations.

The different types of IFRS are below and it also include IAS (International Accounting Standard):

  • IFRS 1 First time adoption of IFRS
  • IFRS 2 Share based payment
  • IFRS 3 Business combination
  • IFRS 4 Insurance Contracts
  • IFRS 5 Non-Current Assets held for sale and Discontinued Operation
  • IFRS 6 Exploration for and evaluation of mineral Resources
  • IFRS 7 Financial Instruments – disclosure
  • IFRS 8 Operating Segments
  •  IFRS 9 Financial Instrument
  •  IFRS 10 Consolidated Financial instrument
  • IFRS 11 Joint arrangements
  • IFRS 12 Disclosure of interest in other entities
  • IFRS 13 Fair Value Measurements
  • IFRS 14 Regulatory Deferral Accounts
  •  IFRS 15 Revenue from Contract
  •   IFRS 16 Lease Accounting
  •  IFRS 17 Insurance Contract
  •  IAS1 Presentation of Financial Statements
  •  IAS 2 Inventories
  •   IAS7 Statement of Cash Flow.
  •   IAS8 The accounting Policies, change in estimates and errors
  •   IAS 10 Events after reporting Period
  •  IAS 11 construction contract
  •  IAS 12 Income Tax
  •  IAS 16 Property, Plant and Equipment
  •  IAS 17 Lease
  •  IAS 18 Revenue
  •  IAS 19 Employee Benefits
  •  IAS 20 accounting for Government Grants and disclosure of Government Assistance
  •  IAS 21 Effects of change in foreign exchange rates
  • IAS 23 Borrowing cost

This is the basics of  IFRS. Will come soon with other detailed IFRS 

description soon.

If anyone wants to know about any other IFRS for which I should write the blog then can comment .

 









 

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