What is the International Financial Regulation Standard?
The International Financial Reporting Standards (IFRS) are a set of accounting rules for public companies with the goal of making company financial statements consistent, transparent, and easily comparable around the world. This helps for auditing, tax purposes, and investing.
International Financial Reporting Standards (IFRS) are a set of accounting standards that govern how particular types of transactions and events should be reported in financial statements.
The International Accounting Standards Board (IASB) issues and develops the IFRS. The purpose of IFRS is that entities have common accounting rules that allow financial statements to be consistent, reliable, and comparable between every business in any country.
The key differences between GAAP and IFRS include: GAAP is a framework based on legal authority while IFRS is based on a principles-based approach. GAAP is more detailed and prescriptive while IFRS is more high-level and flexible. GAAP requires more disclosures while IFRS requires fewer disclosures.
IFRS insists on four key principles for preparing financial statements: clarity, relevance, reliability, and comparability. Clarity means making financial statements easy to read and understand.
International Financial Reporting Standards (IFRS) – as the name implies – is an international standard developed by the International Accounting Standards Board (IASB). U.S. Generally Accepted Accounting Principles (GAAP) is only used in the United States.
International Financial Reporting Standards (IFRS) are a set of accounting rules for the financial statements of public companies that are intended to make them consistent, transparent, and easily comparable around the world.
The Canadian Accounting Standards Board (AcSB) requires publicly accountable enterprises to use IFRS in the preparation of all interim and annual financial statements. Most private companies also have the option to adopt IFRS for financial statement preparation.
IFRSs are required for Government-owned enterprises, newly privatised companies (large taxpayers, or 'LTOs'), banks, and insurance companies. IFRSs required in both consolidated and separate financial statements of financial institutions. IFRSs permitted in both consolidated and separate statements of other companies.
It has not yet been adopted as an official system in the United States. However, any company that does a large amount of international business may need to use IFRS reporting on its financial disclosures in addition to GAAP.
Can U.S. companies use IFRS?
The AICPA's governing Council in May 2008 approved amending Rules 202 and 203 of the Code of Professional Conduct to recognize the IASB as an international accounting standard setter. That removed a potential barrier and gives U.S. private companies and not-for-profit organizations the choice whether to follow IFRS.
GAAP is more detailed and prescriptive while IFRS is more high-level and flexible. GAAP requires more disclosures while IFRS requires fewer disclosures. GAAP is more focused on the historical cost of assets while IFRS allows for more flexibility in the valuation of assets.
IFRS 4 is an International Financial Reporting Standard (IFRS) issued by the International Accounting Standards Board (IASB) providing guidance for the accounting of insurance contracts.
There are four underlying assumptions in IFRS: accrual basis, going concern, stable measuring unit assumption and units of cost purchasing power.
Many multinational companies and national regulators endorse IFRS because it would be easier to compare the financial results of reporting entities from different countries if public companies' financial statements were prepared using the same standards, allowing investors to understand opportunities better.
The three golden rules of accounting are (1) debit all expenses and losses, credit all incomes and gains, (2) debit the receiver, credit the giver, and (3) debit what comes in, credit what goes out.
Alternatives to GAAP: IFRS
One of the more recent sets of accounting rules released is IFRS, or International Financial Reporting Standards. The International Accounting Standards Board (IASB) developed IFRS, and the IFRS Foundation monitors compliance.
IFRS is a principle of the standard-based approach and is used internationally, while GAAP is a rule-based system compiled in the U.S.
IAS Accounting Standards are a set of accounting standards developed by the IASC that provide guidelines for financial reporting by companies across the world. There are 41 IAS accounting standards, which cover various aspects of financial reporting, including; IAS 1 – Presentation of financial statements.
GAAP consists of a common set of accounting rules, requirements, and practices issued by the Financial Accounting Standards Board (FASB) and the Governmental Accounting Standards Board (GASB).
Are International Financial Reporting Standards mandatory?
IFRS are mandatory for listed companies in over 140 countries around the world, including the European Union, Australia, and many countries in Asia and Africa. Many other countries have adopted IFRS voluntarily, recognizing their importance for global competitiveness and investor confidence.
Some reasons for the U.S. not embracing the standards convergence are: U.S. firms are already familiar with the existing standards; the inability or low ability to culturally relate to other countries' accounting systems; and a lack of good understanding of the international principles.
In addition, despite the great number of countries that have adopted IFRS, the three largest economies in the world—the United States, China, and Japan—have not yet fully accepted the IFRS into their national reporting standards, even for listed companies [6].
In terms of the Company's Act a company only needs to apply IFRS if the company is a state-owned company as defined by the Act or if the company is a public company listed on an exchange such as the JSE or AltX for example, all other companies are able to apply IFRS for SMEs.
IFRS Foundation Monitoring Board (Monitoring Board)
The Monitoring Board consists of capital markets authorities responsible for setting the form and content of financial reporting.
