• IFRS (International Financial Reporting Standards)

    IFRS stands for International Financial Reporting Standards which is a globally accepted set of accounting standards presented by IASB (International Accounting Standard Board). Previously it was known as IAS – International Accounting Standards and it is now becoming the mostly used accounting standards by listed public companies across different countries in the world.

    Though it is widely used by the worldwide public listed companies along with the most of Fortune 500 companies, Compliance with IFRS is not mandatory at all. But main governing body of many countries requires their publicly listed enterprises to prepare financial statements as per the IFRS guidelines.

    Main features of IFRS are

    1. It is not mandatory at all to follow the IFRS guidelines.
    2. Companies voluntarily follow the same for global competitiveness and global representation of their financial statements.
    3. IFRS is a set of established accounting standards that is rapidly gaining acceptance among the worldwide companies including the fortune 500 companies.
    4. Standards are promulgated by the London-based International Accounting Standards Board (IASB)–IASB includes representatives from major countries, including the U.S., Germany, Japan etc.
    5. IFRS is generally more focused on objectives and principles and less dependent on detailed rules and interpretations than U.S. GAAP
    6. Standards include IASs and IFRSs
    7. Interpretations include SICs and IFRICs

    IFRS components

    IFRS comprise of five major components, which are provided below

    1. Framework
    2. IFRS – Standards issued after 2001
    3. IAS – Standards issued before 2001
    4. Interpretations issued after 2001 (IFRIC)
    5. Standing Interpretations issued before 2001 (SIC)

    IFRS’s main objective is to provide the proper information about the financial position, performance to a wide range of investors and analysts which will help them to make the proper investment decision. It also provides the current financial status the company to its all the shareholders.

    1. Framework: Framework addresses the concepts underlying the information presented in general purpose financial statements. The objective is to facilitate the consistent and logical formulation of IFRS and resolve all the accounting related issues that can occur.

    2. IFRS: Standards issued by IASB after 2001 are termed as IFRS. As of now, there are total eight different standards which have been issued.

    3. IAS: Standards issued by IASC before 2001 are termed as IAS. As of now, there are twenty nine standards which are active.

    4. IFRIC Interpretations: Interpretations of IFRS are prepared by the International financial reporting interface committee (IFRIC) to give necessary guidance on different accounting issues that different companies are facing while using the IFRS accounting standards. There are now 16 IFRIC interpretations are available to help all the companies across the world.

    5. SIC Interpretations: Before IFRIC replacing the old set of interpretations in 2002, previous set of interpretations were knows as the Standing Interpretations committee (SIC) and there were total 11 SICs available before it was replaced in 2002.

    IFRS Assumptions

    IFRS use two main assumptions

    1. Accrual basis: Transactions recognized when they occur and not on cash basis.
    2. Going Concern: Transactions recognized on the basis that an organization will operate for a foreseeable future.

    IFRS – Financial Statements

    As per IFRS, Financial Statements should have

    1. Four Characteristics

      • Understandability: User should readily understand the financial statements.
      • Relevance: Information must be reliable to the decision making needs of users.
      • Reliability: Information should have the quality of reliability and it should be free from material error and bias.
      • Comparability: User must able to compare with other financial statements to understand the market trend.

    2. Five Elements

      • Assets: Property or possession that a business owns.
      • Liabilities: All borrowings, debts and legal obligations that a business owes outsiders.
      • Equity: Capital investment and business profit.
      • Income: Income encompasses both revenue and gains.
      • Expenses: Expenses encompasses both losses and other expenses like cost of sales, wages and depreciation.

     3. Contents

      • Balance Sheet: A document detailing company’s asset and liabilities.
      • Income Statement: A financial statement summarizing company’s income and expenses.
      • Statement of changes in equity (SOCE) or Statement of recognized income or expenses (SORIE).
      • Cash flow statement: A financial statement to show how changes in balance sheet and income account affects cash and cash equivalents.

    List of IFRS and IFRICs

    Here is the list of IFRS

    IFRS


    Here is the list of IFRICs

    IFRICs

    The main differences among IFRS, India GAAP and US GAAP are presented in another post Main Difference among IFRS, Indian GAAP and US GAAP   

    Source: http://www.ifrs.org/Home.htm

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