International Financial Reporting Standards

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International Financial Reporting Standards (IFRS) are a set of accounting standards. Currently they are issued by the International Accounting Standards Board (IASB). Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS).

IAS were issued between 1973 and 2001 by the board of the International Accounting Standards Committee (IASC). In April 2001 the IASB adopted all IAS and continued their development, calling the new standards IFRS.

Although IAS are no longer produced, they are still in effect unless replaced by an IFRS, whether in its entirety or partially.

International Financial Reporting Standards in a broad sense comprise:

Framework for the Preparation and Presentation of Financial Statements—stating basic principles and grounds of IFRS
IAS—standards issued before 2001
IFRS—standards issued after 2001
SIC—interpretations of accounting standards, giving specific guidance on unclear issues
IFRIC—newer interpretations, issued after 2001

1 Adoption of IFRS
2 Convergence with US GAAP
3 Details
4 References
5 External links

[edit] Adoption of IFRS

IFRS are used in many parts of the world, including the European Union, Russia, South Africa, Hong Kong, Australia, and Singapore. Nearly 100 countries currently require or permit the use of, or have a policy of convergence with, IFRSs. (source: www.iasb.org/About+Us/About+IASB/IFRS+Around+the+World.htm 6/2/2007)

For a current overview see IAS PLUS's list of all countries that have adopted IFRS.

[edit] Australia

The Australian Accounting standards, previous to 1 January 2005, were based around accounting standards developed by the Australian Accounting Standards Board (AASB). As a result of pressure towards international harmonisation, the AASB had been working towards a convergence between the Australian Standards and the IFRS. From 1 January 2005, the Australian equivalent of IFRS have been fully implemented as AASB 101 - 141. It is a requirement that all reporting entities adopt the standards as they have replaced the previous Australian generally accepted accounting principles.

Due to the accounting standards operating halfway through the year, the requirements can be summarised as follows:

Year ended 30 June 2004—Prepare under pre IFRS standards and state in notes the expected effect of the adoption of IFRS
Year ended 30 June 2005—Prepare under pre IFRS standards and prepare a reconciliation to IFRS standards
Year ended 30 June 2006—Prepare under Australian Equivalents to IFRS standards

[edit] European Union

All publicly traded EU companies are to prepare their consolidated accounts using IFRS from 2005. Prior to 2005 there were around 350 publicly listed companies that used IFRS—in 2005 the figure will be around 7,000.

In order to be approved for use in the EU, standards must be endorsed by the Accounting Regulatory Committee (ARC), which includes representatives of member state governments and is advised by a group of accounting experts known as the European Financial Reporting Advisory Group.

Two sections of IAS 39: Financial Instruments: Recognition and Measurement have not been approved by the ARC and in this respect IFRS as applied in the EU differs from that used elsewhere. The IASB is working with the EU to find a way to an acceptable way to remove this anomaly.

As the standards are part of European law the approved standards and approved subsequent changes must be published in the Official Journal of the European Union. On October 13th 2003 the first publication of the standards was included in PB L 261. Changes to the earlier published IAS and IFRS can be monitored using the webpage of the Directorate Internal Market of the European Union on the implementation of the IAS in the European Union.

[edit] Russia

The government of Russia has been implementing a program to harmonize its national accounting standards with IFRS since 1998. Since then twenty new accounting standards were issued by the Ministery of Finance of Russian Federation aiming to align accounting practices with IFRS. Despite of these efforts essential differences between national accounting standards and IFRS remain. From 2004 all commercial banks are obliged to prepare financial statements in accordance with both national accounting standards and IFRS. Full transition to IFRS is delayed and is expected to take place from 2010.

[edit] Turkey

Turkish Accounting Standards Board translated IFRS into Turkish in 2006. As of 31 December 2006 Turkish companies listed in Istanbul Stock Exchange are required to prepare IFRS reports.67uikg

[edit] Convergence with US GAAP

The largest capital market remaining with its own standards is the US. The United States Securities and Exchange Commission requires all overseas companies listed in the US to prepare their results either under US GAAP or according to their local requirements with a footnote reconciling their local GAAP to US GAAP. This imposes considerable expense on companies which are listed on exchanges both in the US and another country.

In 2002 at a meeting at Norwalk, Connecticut, the IASB and the US Financial Accounting Standards Board agreed to harmonise their agenda and work towards reducing differences between the two sets of standards. The SEC has indicated it will remove the reconciliation requirement once it is satisfied that IFRS are of a sufficient standard.

_{Subscript text}^{Superscript text}==IFRS for small and medium business==

This section documents a current event.
Information may change rapidly as the event progresses.

On February 15, 2007 the IASB issued a new draft, the IFRS for small and medium entities (SMEs).

The IASB admitted that full IFRS compliance is too much of a burden for small and medium size businesses and compiled a simplified set of accounting principles that are appropriate for smaller, non-listed companies. Listed companies, even the small ones, are not eligible for this simplified option. The exposure draft removes choices for accounting treatment, eliminates topics that are not generally relevant to SMEs and simplifies methods for recognition and measurement. Thus, the standard reduces the volume of accounting guidance applicable to SMEs by more than 85 per cent when compared with the full set of IFRSs.(IASB newsletter). The IASB expects to finalize and adopt IFRS for SMEs in the middle of 2008. In practice, adoption of IFRS may be a matter of European Union and national governments. Individual business may draw up their balance sheets according to these standards by choice to provide comparable documents across borders for international investors. For the first time, the IASB will provide standardized translations for an IFRS.

[edit] Details

Every accounting standard starts with its own framework. The framework contains the basic accounting principles followed when developing accounting standards. The framework deals with the following issues:

(a) the objective of financial statements;
(b) the qualitative characteristics that determine the usefulness of information in financial statements;
(c) the definition, recognition and measurement of the elements from which financial statements are constructed; and
(d) concepts of capital and capital maintenance.

Framework for the Preparation and Presentation of Financial Statements is the framework used by IFRS.

IFRSs are considered a "principles-based" set of standards, in that they establish broad rules rather than dictating specific treatments. As of 2002 a number of IFRSs offer the preparer choices of treatments; the IASB's Improvements Project is seeking to reduce these choices.

International accounting standards currently in use are as follows:

IFRS 1 First-time Adoption of International Financial Reporting Standards
IFRS 2 Share-based Payment
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures
IFRS 8 Operating Segments (effective Jan. 1st, 2008)

IAS 1: Presentation of Financial Statements
IAS 2: Inventories
IAS 7: Cash Flow Statements
IAS 8: Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Practices
IAS 10: Events After the Balance Sheet Date
IAS 11: Construction Contracts
IAS 12: Income Taxes
IAS 14: Segment Reporting
IAS 15: Information Reflecting the Effects of Changing Prices
IAS 16: Property, Plant and Equipment
IAS 17: Leases
IAS 18: Revenue
IAS 19: Employee Benefits
IAS 20: Accounting for Government Grants and Disclosure of Government Assistance
IAS 21: The Effects of Changes in Foreign Exchange Rates
IAS 22: Business Combinations
IAS 23: Borrowing Costs
IAS 24: Related Party Disclosures
IAS 26: Accounting and Reporting by Retirement Benefit Plans
IAS 27: Consolidated Financial Statements
IAS 28: Investments in Associates
IAS 29: Financial Reporting in Hyperinflationary Economies
IAS 30: Disclosures in the Financial Statements of Banks and Similar Financial Institutions
IAS 31: Financial Reporting of Interests in Joint Ventures
IAS 32: Financial Instruments: Disclosure and Presentation
IAS 33: Earnings Per Share
IAS 34: Interim Financial Reporting
IAS 35: Discontinuing Operations
IAS 36: Impairment of Assets
IAS 37: Provisions, Contingent Liabilities and Contingent Assets
IAS 38: Intangible Assets
IAS 39: Financial Instruments: Recognition and Measurement
IAS 40: Investment Property
IAS 41: Agriculture

[edit] References

International Accounting Standards Board (2006): International Financial Reporting Standards (IFRSs®) 2006 (including International Accounting Standards (IASs™) and Interpretations as at 1st January 2006), LexisNexis, ISBN 3-89699-305-4.

Original texts of IASs/IFRSs, SICs and IFRICs adopted by the Commission of the European Communities and published in Official Journal of the European Union http://ec.europa.eu/internal_market/accounting/ias_en.htm#adopted-commission