International Financial Reporting Standards (IFRS)

IFRS (International Financial Reporting Standards) is a set of accounting standards developed by the International Accounting Standards Board (IASB). The IFRS replaces the older set of standards, the IAS (International Accounting Standards).

International Financial Reporting Standards remove some of the subjectivity from financial reporting. They provide a consistent framework for recognition, measurement, presentation, and disclosure of transactions and events in financial statements.

Need for Convergence

While preparing financial statements, accountants use their judgment to apply accounting principles and assumptions. These statements are used by management, shareholders, analysts, government agencies, and other stakeholders.

Financial statements prepared in this way reflect the differences in accounting practices based on individual judgments. This makes it difficult for stakeholders to compare the financial results of different companies and to make investment decisions.

The convergence of financial reporting and accounting standards will bring about uniformity and transparency. It contributes to the free flow of global investment with substantial benefits to all global market stakeholders.

Adoption of IFRS

• Currently, over 100 countries permit or require IFRS for public companies, with more countries expected to transition to IFRS by 2015
• The European Union formally adopted IFRS in 2005, as the single accounting standard throughout their member countries
• Australia, Russia, China, South Africa, and the GCC nations have already converged or are in the process of converging with IFRS
• Canada has committed to adopting IFRS by 2011
• Japan, India, Brazil, and Mexico are also pursuing convergence or adoption of IFRS
• In the USA, the target date for substantial convergence with IFRS has been set for 2011

IFRS for Listed Companies

The aim of IFRS for listed companies is to promote transparent, sufficient, understandable, and timely financial information to support investors’ decision-making.

In the EU all listed companies have been required to adopt IFRS for their accounting standards and practices since January 2005.

In October 2007 the SEC decided to accept financial statements prepared according to IFRS for non-US companies listed in the US.

Many other countries use or are planning to introduce IFRS for listed companies. Therefore, a transition to IFRS is often a required step in a company’s growth journey.

IFRS for SMEs

Small and medium-sized entities (SMEs) are estimated to account for over 95 per cent of all companies around the world.

A less complex version of the IFRS is used for SMEs.

• Topics not relevant to SMEs are omitted
• Easier options in accounting policy choices are allowed
• Many principles for recognizing and measuring assets, liabilities, income, and expenses in are simplified
• Significantly fewer disclosures are required
• Revisions to the IFRS will be limited to once every three years
• The standard has been written in clear, easily translatable language

IFRS compliance at O2I

At O2I we offer IFRS convergence solutions for accounting and bookkeeping services. We are IFRS compliant and can help bring transparency and uniformity into your company’s financial transactions.

Contact us for IFRS compliant accounting and bookkeeping solutions.