International Financial Reporting Standards

International Financial Reporting Standards (IFRS), are a set of standard rules to ensure consistency and transparency from a global perspective. These rules also provide that financial statements can be comparable around the world. Their main aim is to attain high-quality financial information on capital markets.

Mission Statement of IFRS Foundation

Transparency of financial reports or statements
Accountability of financial information in businesses
Economic efficiency by enabling investors to identify opportunities and risks in allotting capital

Reasons for Adopting Global Accounting Standards

To remove the differences of national accounting standards between one country and another, based on cost and complexity, and ultimately risk in making economic decisions.
To remove the complexity of calculations that might eventually lead to a different opinion on the performance of financial reports. For instance, an organisation may recognise profits under one set of national accounting standards and losses under another from different countries’ perspective.

Benefits of IFRS Standards

IFRS Standards ensure transparency by taking care of comparing financial information internationally and checking the standard of financial reports. In this way, investors and businesses can make educated economic decisions.
IFRS Standards prioritise accountability by minimising the information gap between the capital providers and the people to whom they have invested their finance.
IFRS also contribute to economic efficiency by helping investors in identifying opportunities and risks around the globe. This strategy enables improvement in capital allotment by investors and businesses.
IFRS use single-language accounting to remove confusion among businesses from different parts of the world. This strategy lowers the capital and reporting costs.

Key Strategies involved in Setting IFRS Standards

Public Board meetings broadcast from London branch office
Agenda papers that deal with the IASB's deliberations
Discussion and decision summaries that are made available after meetings by ISAB
Comment letters received as feedback on IASB board meeting

Standards of Financial Reports of IFRS

Financial statements are reported in different forms. They are:

IFRS standards
IFRS for SMEs Standard
IFRS translation
l Editorial corrections
IFRS taxonomy

IFRS Standards

This category deals with various segments, namely:

First-time Adoption of International Financial Reporting Standards
Share-based Payment
Business Combinations
Insurance Contracts
Non-current assets held for sale and discontinued operations
Exploration for and evaluation of mineral resources
Financial instruments: Disclosure
Operating segments
Financial Instruments
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Fair Value Measurement
Regulatory Deferral Accounts
Revenue from Contracts with Customers
Leases
Insurance Contracts

IFRS for SMEs Standard

This category is meant for small companies.
It focuses on details pertaining to the needs of lenders, creditors and users of SME financial reports dealing on cash flows, liquidity and solvency.

IFRS Translation

Translation is another factor which is important in interpreting the financial report in different languages.
It focuses on developing high-quality global accounting standards for use across the globe.

Editorial Corrections

Editorial corrections make a revision on minor inaccuracies, wrong spellings, wrong numbering, and grammatical mistakes.

IFRS Taxonomy

The IFRS Taxonomy improves communication between people preparing financial reports and people who use financial statements that are in accordance with IFRS Standards.
People preparing financial reports can implement IFRS Taxonomy's elements to include or deal with the required disclosures. This makes it easier for the users of the report.

Accounting Standard Requirements

There is a wide range of activities covered by IFRS, and there is a certain practice that all businesses need to follow.

Statement of Financial Position: This point deals with the balance sheets. IFRS determines the reporting of balance sheets.
Statement of Comprehensive Income: This statement can be in the form of a complete financial statement as a whole, or it can break down into a clear profit and loss financial statement, and an explanation of other income, including property and equipment.
Statement of Changes in Equity: This point is so-called a statement of retained earnings, and this documents the company's change in revenues or profit for the given financial period.
Statement of Cash Flow: This report provides a roundup of the company's financial transactions in a given period, breaking down cash flow into Operations, Investment and Finance.

Composition and Roles of IFRS Bodies

In terms of the structure of the IFRS Foundation, there are 3 main tiers. They are:

International Accounting Standards Board
IFRS Trustees
IFRS Monitoring Board

Apart from those above 3 primary constituents of IFRS, there are auxiliary groups as well known as consultative bodies of IFRS. They are:

Standing consultative groups
Transition resource groups (TRGs)
Project consultative groups
Closed consultative groups

Registration with IFRS foundation

There are 2 ways that copyright licensing for adoption can be done. These include:

Single-step adoption

Two ways of single-step adoption include:

If reports are to be published as per the IRFS requirements (including translation) in the official gazette or websites as per the legislation, this requires adoption agreement.
In some jurisdictions/legislation, reporting standards can be adopted by referring to IFRS standards. However, there are no reports produced or translated according to IRFS standards. In such a case, the adoption contract is not needed. However, it is up to the jurisdiction to decide on the access of IRFS requirements. A contract will be required with IFRS to translate or access the material of IRFS.

Convergence

Convergence facilitates the adoption of IRFS standards during the transitional phase in an applied jurisdiction. This phase is to ensure that accounting standards are of high quality and accepted globally. For that, a license is needed to use IRFS materials in local standards while converging with IFRS standards. However, IRFS copyright materials will have to be incorporated within the local standards.

Registration fee

An annual fee needs to be paid based on GDP for:

Adoption agreement to reproduce the text of IFRS requirements in a particular jurisdiction/legislation
Licence to create local standards agreement in order to reproduce the text of IFRS Standards within a local standard

For further details on fee structure, interested jurisdiction/party can correspond with https://www.ifrs.org/use-around-the-world/adoption-and-copyright/#content

Users of IFRS Standards

Users or participants implementing IFRS standards, from different parts of the world, can be categorised based on:

Profiled jurisdictions require the use of IFRS Standards = 144 countries
G20 economies which require IFRS Standards = 15 countries
Profiled jurisdictions require or permit the use of the IFRS for SMEs Standard = 86 countries

Contact information

Address: IFRS Foundation Asia-Oceania office Otemachi Financial City South Tower 5F 1-9-7, Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan and Makoto Takahashi, Director Noriaki Shimazaki, Advisor IFRS Foundation Columbus Building 7 Westferry Circus Canary Wharf London E14 4HD UK Phone: +44(0)2072466410