International Financial Reporting Standards or
IFRS are a set of high-quality, global accounting standards used worldwide. These
standards provide a common global language for business affairs so that company
accounts are understandable and comparable across international boundaries.
The IASB is an independent group comprised of
trustees that have background experience relevant to international business.
These members are responsible for the development and publication of the IFRSs
and approving the interpretation of the IFRSs.
Mexico uses the IFRS that is published by the
IASB. Bolivia uses IFRS and IFRS for SMEs and all financial statements
must be prepared in accordance with Bolivian GAAP. Germany uses the IFRS as
adopted by the EU. In Macedonia IFRS is required for consolidated and
standalone/separate financial statements of companies listed on Macedonian
Stock Exchange. China uses Chinese Accounting Standards (“CAS”) which have
substantively converged with IFRS. Republic of Congo has statutory financial
statements that must be prepared in accordance with the Organization for the
Harmonization of Business Law in Africa (“OHADA”) accounting
principles as well as
IFRS being prohibited.
adopting IFRS, a business can present its financial statements on the same
basis as its foreign competitors, making comparisons easier. Companies with
subsidiaries in countries that require or permit IFRS may be able to use one
accounting language company-wide.
players are the Securities and Exchange Commission, which is responsible for
the supervision and regulation of the securities industry and has oversight
responsibility for the FASB; the Financial Accounting Standards Board, an
independent body that establishes and interprets U.S. GAAP; and the IASB, which
is working with the FASB on the convergence of U.S. GAAP and IFRS.
Comparability is a huge advantage of a single
set of accounting standards because it makes working with international
companies easier when discussing accounting practices. These standards
strengthen the accountability by reducing the information gap between the
providers of capital and the people whom with they have entrusted their money. Lastly,
these standards contribute to economic efficiency by helping investors to identify opportunities and
risks across the world, thus improving capital
Rules-based accounting, used by IFRS, is
basically a list of detailed rules that must be followed when preparing
financial statements. Having a set of rules can increase accuracy and
reduce the ambiguity that can trigger aggressive reporting decisions by
management. Whereas principles-based accounting such as generally accepted accounting
principles (GAAP) is a simple set of key objectives are set out
to ensure good reporting. The fundamental advantage of principles-based
accounting is that its broad guidelines can be practical for a variety of
US GAAP does not require a third balance sheet
whereas IFRS requires a third balance sheet at the beginning of the earliest
comparative period. For US GAAP current or non-current classification,
generally based on the nature of the related asset or liability, is required.
Depreciation of components are permitted but not common in GAAP and component
depreciation is required if components of an asset have differing patterns of
benefit with IFRS.
It is important to learn about IFRS because knowledge
of IFRS provides an ability to practice accounting in the global marketplace. The
IFRS adoption and convergence efforts impact much more than just the accounting
function such as information systems, tax, and the human resources functions in
a company. To make it in the global market you have to have an understanding f
IFRS otherwise you’ll be limiting yourself and your business.