IFRS (International Financial Reporting Standards)
DEFINITION
IFRS (International Financial Reporting Standards)
Posted by: Margaret Rouse
WhatIs.com
International Financial Reporting Standards (IFRS) is a set of accounting standards developed by an independent, not-for-profit organization called the International Accounting Standards Board (IASB).
The goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements. IFRS provides general guidance for the preparation of financial statements, rather than setting rules for industry-specific reporting.
Having an international standard is especially important for large companies that have subsidiaries in different countries. Adopting a single set of world-wide standards will simplify accounting procedures by allowing a company to use one reporting language throughout. A single standard will also provide investors and auditors with a cohesive view of finances.
Currently, over 100 countries permit or require IFRS for public companies, with more countries expected to transition to IFRS by 2015. Proponents of IFRS as an international standard maintain that the cost of implementing IFRS could be offset by the potential for compliance to improve credit ratings.
IFRS is sometimes confused with IAS (International Accounting Standards), which are older standards that IFRS has replaced.
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INTERNATIONAL FINANCIAL REPORTING IS ON THE MOVE.
In May 2012, the Pan African Federation of Accountants (PAFA) – representing 34 African nations – made a broad policy resolution to adopt IFRS, IPSAS and ISA.
Common world-wide business and financial reporting formats are developing. The recent so-called global financial crisis emphasises the need for financial reporting standards. In effect, International Financial Reporting Standards can be a precursor and an example for a much needed global framework for financial and legal standards.
The goal of the IFRS Foundation (IFRSF) is to develop a single set of high-quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated accounting principles.
As of 2005, the European Union (EU) requires all publicly traded entities in member states to prepare their consolidated financial statements under IFRS. These accounting standards may differ significantly from the US-based Generally Accepted Accounting Principles (GAAP) previously applicable.
More than 150 countries now require the application of IFRS in one form or another. The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) are actively pursuing convergence projects. China, India, Japan and other countries have been agreed upon convergence.