What is IFRS? (2024)

FAQs

What is the IFRS and what is its purpose? ›

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.

GAAP is generally more rules-based, with specific guidelines and procedures to follow in numerous scenarios. On the other hand, IFRS is more principles-based and allows for more interpretation, relying on the substance of the transaction rather than strict definitions.

It's like a guidebook aiming to create a common language for accounting, making financial statements clear and consistent globally. IFRS covers various topics, including revenue, taxes, inventories, assets, business combinations, foreign exchange, and how financial statements should be presented.

IFRS requires that financial statements be prepared using four basic principles: clarity, relevance, reliability, and comparability. The principle of clarity requires that financial statements be easy to read and easy to understand.

The Bottom Line. The International Financial Reporting Standards (IFRS) are a set of accounting rules for public companies with the goal of making company financial statements consistent, transparent, and easily comparable around the world. This helps for auditing, tax purposes, and investing.

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.

Share this: International Financial Reporting Standards (IFRS) are a set of accounting standards that govern how particular types of transactions and events should be reported in financial statements.

IFRS is a set of international accounting standards, which state how particular types of transactions and other events should be reported in financial statements. Some accountants consider methodology to be the primary difference between the two systems; GAAP is rules-based and IFRS is principles-based.

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.

It encourages transparency and accountability of financial statements prepared by companies, small firms, and government agencies. As a result, it minimizes the margin of error and manipulation of any holdings and irregularities of funds, transactions, and balances.

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.

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.

IFRS knowledge is valuable for financial analysts, especially when evaluating companies operating internationally. Understanding IFRS allows analysts to accurately assess financial performance, identify trends, and predict future outcomes based on standardized financial information.

Compliance with IFRS ensures that financial statements accurately reflect a company's financial position, performance, and cash flows. Benefits of IFRS Compliance: Enhanced comparability: IFRS compliance allows for better comparison of financial information among companies operating in different jurisdictions.

The main purpose of the Framework is to: assist in the development of future IFRS and the review of existing standards by setting out the underlying concepts.

The Canadian Accounting Standards Board (AcSB) requires publicly accountable enterprises to use IFRS in the preparation of all interim and annual financial statements. Most private companies also have the option to adopt IFRS for financial statement preparation.