What are IFRS Standards?

What are IFRS Standards?

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.

IFRS currently has complete profiles for 166 jurisdictions. including those in the European Union.1 The United States uses a different system, the Generally Accepted Accounting Principles (GAAP).

The IFRS are issued by the International Accounting Standards Board (IASB).2

The IFRS system is sometimes confused with International Accounting Standards (IAS), which are the older standards that IFRS replaced in 2001.

Standard IFRS Requirements

IFRS covers a wide range of accounting activities. There are certain aspects of business practice for which IFRS set mandatory rules.

Statement of Financial Position: This is the balance sheet. IFRS influences the ways in which the components of a balance sheet are reported.

Statement of Comprehensive Income: This can take the form of one statement or be separated into a profit and loss statement and a statement of other income, including property and equipment.

Statement of Changes in Equity: Also known as a statement of retained earnings, this documents the company’s change in earnings or profit for the given financial period.

Statement of Cash Flows: This report summarizes the company’s financial transactions in the given period, separating cash flow into operations, investing, and financing.5

In addition to these basic reports, a company must give a summary of its accounting policies.6 The full report is often seen side by side with the previous report to show the changes in profit and loss.

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A parent company must create separate account reports for each of its subsidiary companies.

Who Uses IFRS?

IFRS are required to be used by public companies based in more than 160 countries, including all of the nations in the European Union as well as Canada, India, Russia, South Korea, South Africa, and Chile.8

The U.S. and China each have their own systems.