What is IFRS?
IFRS stands for International Financial Reporting Standards and it is a set of principles and rules for reporting various transactions and items in the financial statements.
Just like United States have their US GAAP, Canada has its Canadian GAAP, United Kingdom has its UK GAAP etc, the WORLD will have its world GAAP that is under construction right now. But it’s not called “world GAAP”—it is called IFRS.
Now be careful. Before some time, IFRS was called IAS (International Accounting Standards). Indeed, the first standards carried the name starting with “IAS”, e.g. IAS 1—Presentation of Financial Statements. Exactly 41 standards started with IAS.
But then, IASs were renamed to IFRS. After renaming and rebranding the titles of new standards start with IFRS.
Why do we need IFRS?
Today, everything in the world comes closer than ever before. Things are harmonizing and people learn to think and act global.
And indeed, you can see that in every step you make—you can shop the same items anywhere in the world, you can get the same food in McDonalds anywhere in the world, you can even fly anywhere in the world in less than 24 hours.
Accounting and financial reporting are no exception. This is where IFRS has its own spot—it will serve as unified set of principles for financial reporting anywhere in the world.
What is the main benefit of IFRS?
In today’s ever globalizing world, the key concept is COMPARABILITY.
Just imagine yourself as the owner of multinational holding who wants to review financial results of your companies in different countries. But—every country uses different accounting rules!
For example, revenues are reported on accrual basis in 1 country, and on cash basis in another country. How can you say which of your companies has better sales if those figures are incomparable?
Or even if you are small investor playing on the stock exchange and you (hopefully) look to financial statements of your prospect investment before buying. How can you read those statements if everybody reports differently?
So you get the picture. IFRS gives us united global set of accounting and reporting rules, so that you understand financial statements from whatever country. And not only this—if your company wants access to international capital or to stock exchange, it must present its financial statements in compliance with IFRS.
Who reports under IFRS?
Currently, there are over 120 countries who adopted IFRS, some of them fully, some of them partially. The aim is to adopt IFRS by 2015.
The fact is that one of major players in the global market, the United States still use their US GAAP. In this case, US GAAP and IFRS shall rather approach each other and gradually eliminate differences — or converge. The IFRS convergence process should have been finished by 2012.
But, FASB (issuer of US GAAP) and IASB (issuer of IFRS) slowed down the convergence process and new deadline is somewhere around 2015.
Moreover, SEC (Securities and Exchange Commission) should have decided about incorporation of IFRS for U.S. issuers until the end of 2011, but the decision has been delayed by few more months.
If you wish to get the idea how to start studying IFRS, read our article on How to learn IFRS.
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Silvia, what is there to gain by the advocacy of early implementation of new standards issued by the IASB. Where management decide to wait ( rather than early application) and adopt a new standard on its application date because research indicates that it will adversely affect its net income, is there an ethical issue involved? will one be acting immorally? and who might be affected by by the decision against early implementation?
why we are still use the IAS & IFRS , why not use the IFRS only
History 🙂
why is ifrs gaining much acceptance, while there are exceptions
Hi Silvia,
You have an amazing website! I’ve learned a lot from you and couldn’t thank you enough for it.
I’m very confused now and hoping you could clear some doubts of mine:
So IASs are IFRSs are essentially the same, just that IASs have not been updated since 2001, and IFRSs are implemented since 2001.
Even though IFRSs are replacing the IASs soon, some companies are currently still using the IASs.
Is the above correct?
What about the conceptual framework? What is it about? I read it somewhere that the conceptual framework is not IFRS and if there is conflict between them, the IFRS will prevail. I have always thought that the conceptual framework consists of all the IFRSs! 🙁
Hope you could help me on these!
Regards
Derrick
Dear Derrick,
thank you for your kind words!
I must correct you a bit. It is true that IASs were issued prior 2001 and IFRSs in or after 2001. But, all IASs remained effective and valid until they are replaced by new IFRS. Therefore, if a company uses IFRS, it means that it uses both IAS still in place (e.g. IAS 16, IAS 2, IAS 1 etc.) and IFRS in place. They create one set of standards, they just have different abbreviations due to the date of their issuance.
The Conceptual Framework does not contain all IFRS, but it outlines the basic principles. You can read more about it here. Hope it helps! S.
Dear Silvia,
When we prepare IFRS accounts for UK company , the accounting policy note say, These accounts have been prepared under “IFRS as adopted by the European Union”.
My question is Can WE JUST not prpeare accounts under IFRS for UK company without saying as adopted by the European Union.
Hi Rehan,
I don’t quite understand your question, but please note the European Union endorsed IFRS with some exceptions – e.g. IFRS 9 is NOT valid. Therefore, if you say that you prepare your accounts under IFRS, then you can use IFRS 9 and other standards fully. If you say that you prepare financial statements under IFRS as adopted by the EU, then you cannot use IFRS 9 and you need to obey a few exceptions. Hope it’s clear!
Kind regards, S.
Pls.we were giving assignment to write everything about ifrs in 10 passages
I am preparing for the Dec15 Dipl IFRS program, I do not have the full confidence yet. Would you kit help given the short time of 2 weeks left.
Yes, I think so. It helped many students to pass DipIFR and other exams, too.
Is IFRS Beneficial in India
Yes 🙂
Hi
Thanks a lot your immense contribution. How can i get the entire package both IFRS video lectures and Excel as well.
Thanks
Hi Robert, thank you for your interest in my courses. Please, look to http://www.cpdbox.com/ifrs-kit . There’s a “Get Instant Access” button to make a payment for our courses. Then you’ll receive further instructions to access all the materials. Thank you! S.
Hi;Silvia.im an acca student & lm sitting for my P2 exam in june 2014.my dream has been to be the best accountant a company can ever ask for;but ever since my encounter with p2 l feel like my dream is slowly being shattered.everything to do with the standards is so hard to grasp.after coming across with your website just now & going through it has made me realise that all you said about your initial approach is exactly what lm doing & it has left me stuck l don’t know what to.please help me with all the possible tips to pass this subject with a distinction.if l had money l would subscribe for all your material;but l don’t have as lm still a student.lm really looking forward to your response.sorry for the long essay about my problem.once again please help me..
Hi Roxanne!
First of all, please be sure that I really came across all of what you described. I was there, too.
I will reply to your e-mail in more details privately, but here I can give you just 1 advice: please, don’t panic and don’t give up. Get up, dress up, show up and NEVER give up. Because once you run away, it’s OVER.
Also, let me assure you that many of IFRSbox readers passed their P2 solely by referring to my free materials in the website plus the IFRS In 1 Day, so starting out with the free stuff in this site works.
You have already subscribed to my newsletter, so you will soon receive 1 sweet email with my tips for IFRS learning. Let me sum up here:
1. Make BABY steps. Don’t study every day for 2 hours just do it for 15 minutes, but effectively.
2. Be consistent. Never skip a single day. If you do it from now until June, you’ll be greatly prepared to pass. But make sure to carve out the best from your learning sessions.
3. Find the greatest possible resources that fit you and stick with them.
Hope it helps a bit – I’ll come back to you in the e-mail. S.
Looking International standard reports
need of IFRS
IFRS is the reporting for gains and loses in financial statement on the balance sheet and income statement that in common is to decide that business is going or not
Dear Silvia.
Can you just brief me what is the difference between IFRS and IAS .Why same country apply both IFRS and IAS
Thanks
Hello,
IAS = International Accounting Standards, IFRS = International Standards for Financial Reporting. All standards issued before 2001 were IAS, all standards issued AFTER 2001 are IFRS. IASs were not renamed after the change, that’s why there are both IAS and IFRS. But they still comprise the same set of financial reporting rules. So if you read about IFRS now, it means both older IAS and newer IFRS.
Hope it’s clear now.
Silvia, IFRSbox.com