Tuesday, May 22, 2012
What is IFRS?
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IFRS stands for International Financial Reporting Standards. IFRS is the international accounting framework in which to properly manage and report financial information. It is derived from the statement of Accounting at the London-based International Standards Board (IASB). It is currently the accounting framework that is needed in more than 120 countries.
It requires businesses to report their financial results and financial position using the same rules, this means that, unless there is manipulation of fraud, there is considerable uniformity in financial reporting of all businesses that use IFRS, which makes it easier to compare and contrast the results their finances.
IFRS is used mainly by companies report their financial results anywhere in the world except the United States. Financial Accounting Standards, or GAAP, the accounting framework used in the United States. Much more rules-based GAAP than IFRS. IFRS focuses more on general principles of GAAP, IFRS body of work that makes a much smaller, cleaner, and easier to understand than GAAP.
IFRS includes a wide array, including:A. Presentation of financial statements2. Revenue recognition3. Payroll costs4. Borrowing costs5. Income tax6. Investments in associates7. Stock8. Fixed assets9. Intangible assets10. Lease11. Pension12. Merger13. Foreign exchange rates14. Segment operating15. Events after the balance sheet date
Specialized industry accounting, such as mineral and agricultural resourcesThere are several working groups that gradually reduces the difference between GAAP and IFRS accounting framework, so that eventually there should be little difference in the reported results of a business if the switch between the two frameworks. There is another purpose to eventually join the GAAP to IFRS, but this has not happened.
There will be a reduced cost to the company after two accounting frameworks more closely aligned, because they do not have to pay to have their financial statements are restated to show results in another framework in cases where they have to report their results in other locations where the necessary framework .
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