Key IFRS standards compared to US GAAP and other accounting standards
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What are IFRS Standards?
IFRS standards are International Financial Reporting Standards (IFRS) that consist of a set of accounting rules that determine how transactions and other accounting events are required to be reported in financial statements. They are designed to maintain credibility and transparency in the financial world, which enables investors and business operators to make informed financial decisions.
IFRS standards are issued and maintained by the International Accounting Standards Board and were created to establish a common language so that financial statements can easily be interpreted from company to company and country to country.
IFRS are the standard in over 100 countries, including the EU and many parts of Asia and South America. The United States, however, has not yet adopted them and the SEC is still deciding whether or not they should move toward them as the official standard of accounting.
List of IFRS Standards
Below is a list of IFRS standards fromhttp://www.ifrs.org/issued-standards/list-of-standards/
| IFRS # | IFRS Standard |
|---|
| 1 | First-time Adoption of International Financial Reporting Standards |
| 2 | Share-based Payment |
| 3 | Business Combinations |
| 4 | Insurance Contracts |
| 5 | Non-current Assets Held for Sale and Discontinued Operations |
| 6 | Exploration for and Evaluation of Mineral Resources |
| 7 | Financial Instruments: Disclosures |
| 8 | Operating Segments |
| 9 | Financial Instruments |
| 10 | Consolidated Financial Statements |
| 11 | Joint Arrangements |
| 12 | Disclosure of Interests in Other Entities |
| 13 | Fair Value Measurement |
| 14 | Regulatory Deferral Accounts |
| 15 | Revenue from Contracts with Customers |
| 16 | Leases |
| 17 | Insurance Contracts |
IFRS vs. US GAAP
The largest difference between the US GAAP (Generally Accepted Accounting Principles) and IFRS is that IFRS is principle-based while GAAP is rule-based. Rule-based frameworks are more rigid and allow less room for interpretation, while a principle-based framework allows for more flexibility.
There are pros and cons to both approaches, depending on how they are used. For example, using a standard that fits within a “rule” but that clearly does not represent the principle behind the standard can be a downside of the GAAP. While conversely, taking an overly liberal interpretation of standards is a potential drawback to the IFRS.
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FAQs
What Are International Financial Reporting Standards (IFRS)? 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.
What are 4 general IFRS principles? ›
IFRS insists on four key principles for preparing financial statements: clarity, relevance, reliability, and comparability. Clarity means making financial statements easy to read and understand.
What is the difference between IFRS and GAAP standards? ›
The key differences between GAAP and IFRS include: GAAP is a framework based on legal authority while IFRS is based on a principles-based approach. GAAP is more detailed and prescriptive while IFRS is more high-level and flexible. GAAP requires more disclosures while IFRS requires fewer disclosures.
How many IFRS are there? ›
There are currently 16 International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). 2. What is the purpose of IFRS rules?
What is requirement of IFRS? ›
The standard requires a complete set of financial statements to comprise a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity and a statement of cash flows.
What is IFRS in simple terms? ›
What is IFRS? IFRS stands for international financial reporting standards. It's a set of accounting rules and standards that determine how accounting events should be reported in your business's financial statements.
What are IFRS standard rules? ›
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. The IFRS is issued by the International Accounting Standards Board (IASB).
Can US companies use IFRS? ›
The AICPA's governing Council in May 2008 approved amending Rules 202 and 203 of the Code of Professional Conduct to recognize the IASB as an international accounting standard setter. That removed a potential barrier and gives U.S. private companies and not-for-profit organizations the choice whether to follow IFRS.
How is IFRS different from accounting standards? ›
The key difference between IAS and IFRS is that IAS is the earlier version of the accounting standards, while IFRS is a more up-to-date and widely used version worldwide. IFRS provides more detailed requirements for financial reporting and covers a broader range of accounting issues than IAS.
What is one main difference between IFRS and GAAP? ›
One of the key differences between these two accounting standards is the accounting method for inventory costs. Under IFRS, the LIFO (Last in First out) method of calculating inventory is not allowed. Under the GAAP, either the LIFO or FIFO (First in First out) method can be used to estimate inventory.
Some reasons for the U.S. not embracing the standards convergence are: U.S. firms are already familiar with the existing standards; the inability or low ability to culturally relate to other countries' accounting systems; and a lack of good understanding of the international principles.
What is the US equivalent of IFRS? ›
"Generally Accepted Accounting Principles (GAAP)."
What is the hardest IFRS standard? ›
IFRS 9 Financial Instruments is one of the most challenging standards because it's sooo complex and sometimes complicated.
Who must use IFRS? ›
IFRSs are required for Government-owned enterprises, newly privatised companies (large taxpayers, or 'LTOs'), banks, and insurance companies. IFRSs required in both consolidated and separate financial statements of financial institutions. IFRSs permitted in both consolidated and separate statements of other companies.
Which companies use IFRS? ›
Wipro, Infosys Technologies, NIIT, Mahindra & Mahindra, Tata Motors, Bombay Dyeing and Dr Reddy's Laboratories. India's blue-chip companies have begun to align their accounting standards to the International Financial Reporting Standards (IFRS), three years ahead of the mandatory time for the switchover.
When should IFRS be used? ›
In terms of the Company's Act a company only needs to apply IFRS if the company is a state-owned company as defined by the Act or if the company is a public company listed on an exchange such as the JSE or AltX for example, all other companies are able to apply IFRS for SMEs.
What are the four pillars of IFRS? ›
IFRS S1 - General Requirements for Sustainability-related Financial Disclosures and IFRS S2 - Climate-related Disclosures require information to be provided across four areas: Governance, Strategy, Risk Management, Metrics and Targets.
What are the 4 assumptions of IFRS? ›
Four underlying assumptions characterizes the IFRS: going concern, accrual basis, stable measuring unit assumption and units of cost purchasing power. Below these assumptions are explained in further detail: 1. Going concern: The assumption that a business entity will be in operation for the foreseeable future.
What is IFRS 4 in detail? ›
IFRS 4 applies to all insurance contracts (including reinsurance contracts) that an entity issues and to reinsurance contracts that it holds, except for specified contracts covered by other Standards.
What are the 4 general accounting principles quizlet? ›
United States Generally Accepted Accounting Principles. It is a set of rules, standards, and conventions accounts follow in recording and summarizing and in the preparation of financial statements. Accounting Entity, Going Concern, Monetary Unit Principle, and Time Period Principle are the four basic assumptions.
