International Financial Reporting Standards Totally Explained

Everything about International Financial Reporting Standards totally explained

International Financial Reporting Standards (IFRS) are standards and interpretations adopted 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.

Adoption of IFRS

IFRS are used (but not required) in many parts of the world, including the European Union, Hong Kong, Australia, Pakistan, India, GCC countries, Russia, South Africa, Singapore and Turkey. As of March 28, 2008, about 75 countries require the use of IFRS, or some form of modified IFRS. Some other notable countries, as described below, have decided to adopt IFRS, or some modified form of it, in the future.
For a current overview see IAS PLUS's list of all countries that have adopted IFRS.

Australia

The Australian iiiAccounting 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 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've 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

Canada

The use of IFRS will be required in 2011 for Canadian publicly accountable profit-oriented enterprises. This includes public companies and other “profit-orientated enterprises that are responsible to large or diverse groups of shareholders.”

European Union

All listed EU companies (including banks and insurance companies) have been required to use IFRS since 2005. Prior to 2005, there were around 350 publicly listed companies that used IFRS.
   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. As a result IFRS as applied in the EU may differ from that used elsewhere.
   Parts of the standard IAS 39: Financial Instruments: Recognition and Measurement were not originally approved by the ARC. IAS 39 was subsequently amended, removing the option to record financial liabilities at fair value, and the ARC approved the amended version. The IASB is working with the EU to find an acceptable way to remove a remaining anomaly in respect of hedge accounting.
   As the standards are part of the European law, the approved standards and approved subsequent changes must be published in the Official Journal of the European Union. On October 13, 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 Web site of the Directorate Internal Market of the European Union

on the implementation of the IAS in the European Union.
From 2007 companies traded on the Alternative Investment Market in the UK will be required to prepare their accounts using IFRS..

Russia

The government of Russia has been implementing a program to harmonize its 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 and IFRS remain. From 2004 all commercial banks are obliged to prepare financial statements in accordance with both and IFRS. Full transition to IFRS is delayed and is expected to take place from 2011.

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.

Singapore

Until 2007, the Council of Corporate Disclosure and Governance (CCDG) was in charge of standard setting in Singapore. The CCDG had multiple responsibilities and thus, it was decided that in order for greater transparency and independence, these responsibilities would be divided up.
   Currently, the Accounting Standards Committee (ASC) is in charge of standard setting. Singapore closely models its Financial Reporting Standards (FRS) according to the IFRS, with appropriate changes made to suit the Singapore context.
   Before a standard is enacted, consultations with the IASB are made to ensure consistency of core principles . This also allows both parties to engage in constant feedback in an effort to improve the IFRS general frameworks.
   Companies listed on the Singapore stock exchange are required to follow the latest sets of FRS, to be audited by one of the Big 4 Accounting firms. Small Medium Enterprises (SMEs) have their own set of accounting standards and private firms are encouraged to adopt FRS for greater accountability.

United States and convergence with US GAAP

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 IFRS and U.S. generally accepted accounting principles (GAAP or the Norwalk Agreement). In February 2006 FASB and IASB issued a Memorandum of Understanding including a programme of topics on which the two bodies will seek to achieve convergence by 2008.
US companies registered with the United States Securities and Exchange Commission must file financial statements prepared in accordance with US GAAP. Until 2007, foreign private issuers were required to file financial statements prepared either (a) under US GAAP or (b) in accordance with local accounting principles or IFRS with a footnote reconciling from local principles or IFRS to US GAAP. This reconciliation imposed extra expense on companies which are listed on exchanges both in the US and another country. From 2008, foreign private issuers are additionally permitted to file financial statements in accordance with IFRS as issued by the IASB without reconciliation to US GAAP.

IASB current projects

Convergence projects with FASB

Government grants

Joint ventures

Impairment

Income tax

Investment properties

Research and development

Subsequent events

Projects under research

Derecognition (Asset and/or liabilities)

Financial instruments (replacement of existing standards -> Merge all 3 standards)

Intangible assets

Liabilities and Equity

Structure of IFRS

IFRSs are considered a "principles-based" set of standards in that they establish broad rules as well as dictating specific treatments.
International Financial Reporting Standards comprise:

International Financial Reporting Standards (IFRS) - standards issued after 2001

International Accounting Standards (IAS) - standards issued before 2001

Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC)'-issued after 2001

Standing Interpretations Committee (SIC) - issued before 2001 There is also a Framework for the Preparation and Presentation of Financial Statements which describes some of the principles underlying IFRS.
List of IFRS statements
The following IFRS statements are currently issued:

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

IAS 1: Presentation of Financial Statements

IAS 2: Inventories

IAS 7: Cash Flow Statements

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors

IAS 10: Events After the Balance Sheet Date

IAS 11: Construction Contracts

IAS 12: Income Taxes

IAS 14: Segment Reporting (superseded by IFRS 8 on January 1, 2008)

IAS 16: Property, Plant and Equipment

IAS 17: Leases

IAS 18: Revenue

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance

IAS 21: The Effects of Changes in Foreign Exchange Rates

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 31: Interests in Joint Ventures

IAS 32: Financial Instruments: Disclosure and Presentation

IAS 33: Earnings Per Share

IAS 34: Interim Financial Reporting

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
Interpretations

Preface to International Financial Reporting Interpretations (Updated to January 2006)

IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities (Updated to January 2006)

IFRIC 7 Approach under IAS 29 Financial Reporting in Hyperinflationary Economies (Issued February 2006)

IFRIC 8 Scope of IFRS 2 (Issued February 2006)

IFRIC 9 Reassessment of Embedded Derivatives (Issued April 2006)

IFRIC 10 Interim Financial Reporting and Impairment (Issued November 2006)

IFRIC 11 IFRS 2-Group and Treasury Share Transactions (Issued November 2006)

IFRIC 12 Service Concession Arrangements (Issued November 2006)

SIC 7 Introduction of the Euro (Updated to January 2006)

SIC 10 Government Assistance-No Specific Relation to Operating Activities (Updated to January 2006)

SIC 12 Consolidation-Special Purpose Entities (Updated to January 2006)

SIC 13 Jointly Controlled Entities-Non-Monetary Contributions by Venturers (Updated to January 2006)

SIC 15 Operating Leases-Incentives (Updated to January 2006)

SIC 21 Income Taxes-Recovery of Revalued Non-Depreciable Assets (Updated to January 2006)

SIC 25 Income Taxes-Changes in the Tax Status of an Entity or its Shareholders (Updated to January 2006)

SIC 27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease (Updated to January 2006)

SIC 29 Disclosure-Service Concession Arrangements (Updated to January 2006)

SIC 31 Revenue-Barter Transactions Involving Advertising Services (Updated to January 2006)

SIC 32 Intangible Assets-Web Site Costs (Updated to January 2006)
Features of IFRS
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Further Information
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