2020-01-03 15:02:23Accounting & TaxesEnglishIFRS are a uniform collection of high quality globally accepted Accounting Standards that are set by the International Accounting Standards...https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2020/01/IFRS-International-Financial-Reporting-Standards.jpghttps://quickbooks.intuit.com/in/resources/accounting-taxes/ifrs/IFRS: International Financial Reporting Standards

IFRS: International Financial Reporting Standards

5 min read

Global economies today depend heavily on international financial transactions and unrestrained movement of international capital. As per the statistics, more than one third of the financial transactions take place internationally which is bound to grow in the times to come.

Investors on the one hand want to expand and invest in various avenues across the globe. On the other hand companies, seeking to raise capital, enter into financial transactions and carry business operations across many countries.

Earlier, such international transactions led to complications such as different national accounting standards adopted by different countries. Each country following its own accounting standards meant increased cost, difficulty and risk on the part of companies producing financial statements.

Further, it will also impact the stakeholders using such financial statements to undertake key economic decisions. Additionally, it required the accounting professionals to understand and study national accounting standards thus adding to the complexity.

This is because business organizations presented financial information in the accounting statements following their national accounting standards. Hence, different parameters were used to calculate various amounts.

Thus, a smallest variation impacted the business entity’s financial position in a big way. Therefore, governments, accounting professionals, international organizations and business associations desired to have a uniform set of global accounting standards that gave way to IFRS.

What is IFRS?

International Financial Reporting Standards (IFRS) are a uniform collection of high quality globally accepted Accounting Standards. These Standards are set by the International Accounting Standards Board (IASB).

Such standards are set with the motive to bring transparency, accountability and efficiency in the international financial markets.

Companies must adopt these Accounting Standards while preparing and issuing their financial statements thus bringing uniformity in the financial information. Further, IFRS Standards are mainly used by companies listed on the stock exchange and financial institutions such as banks.

Benefits of IFRS

National Accounting Standards created increased complexity in respect of financial reporting by business entities. Thus, adoption of IFRS has helped business overcome these difficulties and offered benefits which are as follows:

  • Transparency

With a single set of accounting standards being adopted by business entities across the world, IFRS has led to increased transparency. This is because IFRS now allows business entities to compare financial statements easily.

In addition to this, such a common set of rules help in improving the quality of financial information, thus allowing stakeholders to take key decisions effectively.

  • Accountability

IFRS further helps in reinforcing accountability by bridging the information disparity between persons providing capital and the business entities to whom such capital has been given. These Standards give information which is necessary to hold the management accountable.

Further, as these standards allow for increased comparability of financial information, they are important for Regulators across the globe.

  • Efficiency

IFRS Standards lead to economic efficiency. This is because such Standards help investors to spot opportunities as well as risks that further improve capital allocation.

Further, using a common set of rules across the globe means reduced cost of capital as well as other reporting costs for business entities.

Financial Statements in IFRS

A complete collection of Financial Statements depicting fair representation of the financial position of a business entity and complying to IFRS are given below:

  • Statement of Financial Position – Balance Sheet at the end of the accounting period
  • The Statement of Profit & Loss and Other Comprehensive Income for the given accounting period. This can be prepared as a single statement. Or it can also be presented by showing Profit or Loss section in a different statement for Profit or Loss with Statement showcasing comprehensive income subsequent to P&L.
  • Statement of Changes in Equity for the accounting period
  • The Statement of Cash Flows for the accounting period
  • Notes that contain a gist of important accounting policies and other explanatory notes

Business entities at times are also required to showcase statements of financial position of earlier periods in cases when:

  • Business entity applies an accounting policy retrospectively
  • Reclassifies items in its financial statements retrospectively

List of IFRS Standards

Following are the list of IFRS standards set by IASB:

Accounting StandardDescription of Accounting Standard
IFRS 1First Time Adoption of International Financial Reporting Standards
IFRS 2Share Based Payment
IFRS 3Business Combinations
IFRS 4Insurance Contracts
IFRS 5Non-Current Assets Held for Sale and Discontinued Operations
IFRS 6Exploration For and Evaluation of Mineral Resources
IFRS 7Financial Instruments: Disclosures
IFRS 8Operating Segments
IFRS 9Financial Instruments
IFRS 10Consolidated Financial Statements
IFRS 11Joint Arrangements
IFRS 12Disclosure of Interests in Other Entities
IFRS 13Fair Value Measurement
IFRS 14Regulatory Deferral Accounts
IFRS 15Revenue From Contracts With Customers
IFRS 16Leases
IFRS 17Insurance Contracts
IAS 1Presentation of Financial Statements
IAS 2Inventories
IAS 7Statement of Cash Flows
IAS 8Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10Events After The Reporting Period
IAS 11Construction Contracts
IAS 12Income Taxes
IAS 16Property, Plant and Equipment
IAS 17Leases
IAS 18Revenue
IAS 19Employee Benefits
IAS 20Accounting for Government Grants and Disclosure of Government Assistance
IAS 21The Effects of Changes in Foreign Exchange Rates
IAS 23Borrowing Costs
IAS 24Related Party Disclosures
IAS 26Accounting and Reporting By Retirement Benefit Plans
IAS 27Separate Financial Statements
IAS 28Investments in Associates and Joint Ventures
IAS 29Financial Reporting in Hyper Inflationary Economies
IAS 32Financial Instruments: Presentation
IAS 33Earnings Per Share
IAS 34Interim Financial Reporting
IAS 36Impairment of Assets
IAS 37Provisions, Contingent Liabilities and Contingent Assets
IAS 38Intangible Assets
IAS 39Financial Instruments: Recognition and Measurement
IAS 40Investment Property
IAS 41Agriculture
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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