(IFRS) stands for International Financial Reporting Standards. It is a set of accounting standards developed by the International Accounting Standards Board (IASB) to provide a common global framework for financial reporting by companies.
IFRS aims to ensure consistency, comparability, and transparency in financial statements, making it easier for investors, analysts, and other stakeholders to understand and assess the financial performance of companies operating in different countries.
IFRS covers various aspects of financial reporting, including:
Recognition and Measurement: IFRS provides guidance on when and how to recognise and measure various assets, liabilities, income, and expenses in financial statements.
Presentation: The standards outline how financial statements should be structured and presented, including requirements for balance sheets, income statements, cash flow statements, and notes to the financial statements.
Disclosure: IFRS mandates the disclosure of relevant information in financial statements, ensuring that users of the financial statements have a clear understanding of a company’s financial position, performance, and risks.
Consolidation: IFRS provides guidelines for the consolidation of financial statements when a company controls or has significant influence over other entities.
Leases: IFRS 16, specifically, deals with accounting for leases and requires lessees to recognise most leases on their balance sheets.
Revenue Recognition: IFRS 15 outlines principles for recognising revenue from contracts with customers.
IFRS is used in many parts of the world, including the European Union, Australia, Canada, and several Asian and African countries. However, it’s important to note that some countries, notably the United States, use a different set of accounting standards called Generally Accepted Accounting Principles (GAAP). While there have been ongoing convergence efforts between IFRS and GAAP, there are still differences between the two systems.
The adoption of IFRS has helped global businesses, investors, and financial institutions understand financial information from companies across different countries more easily, facilitating international investment and business activities. It also enhances the comparability of financial statements and reduces the complexity of financial reporting for multinational corporations.