What are IFRS?
So what are IFRS? Why is everyone talking about that? Why do we need it? And who uses it?
IFRS is an acronym for International Financial Reporting Standards. It is a set of principles and standards for reporting many different transactions in financial statements.
Just like the US uses US GAAP, Canada uses its own Canadian GAAP, Great Britain uses UK GAAP, etc., everyone will use their global GAAP – IFRS.
Why do we need IFRS?
Today, everything in the world is closer than ever. All things harmonize and people study how to behave globally.
And really, it’s clear in every move you make: It’s possible to buy the same products anywhere, you can find similar meals at “Jack in the box” anywhere in the world, and it’s also possible to fly anywhere in the world. within a day.
Accounting along with financial information is no exception. That is where IFRS have their own position: they will act as a harmonized set of regulations regarding financial reporting throughout the world.
Do you know the main benefit of IFRS?
Here, in the globalizing planet, the crucial idea is the ability to compare.
Imagine yourself as the owner of a multinational company who wants to examine the financial performance of their organizations from various areas. But, each area applies its own accounting guidelines!
Let’s say revenue is reported on an accrual basis in one area and on a cash basis in a different location. How can you tell which of your organizations is earning the best revenue when these results are second to none?
Or possibly, you are a small investor operating in the stock market. Investors often review the financial reports of their potential stocks before buying. How can you read all the documents when they all report differently?
You get the understanding. IFRS gives us harmonized guidelines for accounting and financial reporting, so everyone understands financial reports from anywhere in the world. And not only this, if any corporation tries to obtain financing abroad or go public, they must prepare their financial reports in line with IFRS.
Which countries present their financial statements according to IFRS?
Currently, more than 120 countries follow IFRS, some of them fully, some of them partially. In the ideal case, IFRS should be implemented globally by 2015.
In fact, undoubtedly one of the key players in the world economy, the US continues to use its own US GAAP. Under this circumstance, US GAAP and IFRS will converge and also gradually reduce the differences. The IFRS convergence process should have been completed by 2012.
But, FASB (setter of US GAAP) and IASB (setter of IFRS) delayed the convergence progress and the latest due date is around 2015. Also, the SEC (Securities and Exchange Commission) should have decided regarding the inclusion of IFRS for US companies. at the end of 2011, but the decision has been postponed for several months.
You can find useful information, examples and a free e-book on IFRS at http://www.ifrsbox.com, a site dedicated to online IFRS training – helping accountants, CFOs, finance students and anyone interested in understanding IFRS and its application in their daily work.