IFRS were replaced by international accounting standards which are the older standards and so IFRS are sometimes confused with them. International Financial Reporting Standards are designed as a common global language for business activities so that company accounts can be understood properly and can be compared across international boundaries. They are the result of increasing international shareholding and trade and are specifically important for the companies that have dealings in several countries. They are successfully replacing a number of national accounting standards.
IFRS is a set of international accounting standards that states how particular types of transactions and other events should be reported in financial statements. IFRS are issued by the International Accounting Standards Board. IFRS was started as an attempt to harmonize accounting across the European union but the importance of harmonization quickly made the concept popular all over the world.
Conversion is much more than a technical accounting issue. IFRS in India may significantly affect a company’s everyday operation and may even impact the reported profitability of the business itself. Conversion brings a one-time opportunity to comprehensively reassess financial reporting and take ‘a clean sheet of paper’ approach to financial policies and processes.
Relevance (Materiality) and faithful representation are the two qualitative characteristics of financial statements. Comparability, verifiability, timeliness, and understandability are the enhancing qualitative characteristics of financial statements. Financial statements are a structured representation of the financial position and financial performance of an entity. The main objective of financial statements is to provide information about the financial position, financial performance, and cash flows of an entity that is useful to a wide range of users in making economic decisions. The results of the management’s stewardship of the resources are also shown by the financial statements. To meet this objective, financial statements give information about an entity’s assets, liabilities, equity, income, and expenses including gains and losses, contributions by and distributions to owners in their capacity as owners, and cash flows.
International Financial Reporting Standards are presently adopted in many parts of the world including the European Union, India, Hong Kong, Malaysia, Pakistan, Australia, GCC Countries, Russia, Chile, South Africa, Singapore, and Turkey. It has been not adopted in the United States. In August 2008, more than 113 countries around the world, including all of Europe, currently require or allow IFRS reporting, and 85 need IFRS reporting for all domestic listed companies, according to the U.S. Securities and Exchange Commission.
It is generally expected that IFRS adoption worldwide will be profitable to investors and other users of financial statements, by decreasing the cost of comparing alternative investments and increasing the quality of information. Companies are also expected to benefit, as investors will be more willing to provide financing.
To assess progress towards the goal of a single set of global accounting standards, the IFRS Foundation has developed and posted profiles about the use of IFRSs in individual jurisdictions. These are based on information from various sources. Currently, profiles are completed for 124 jurisdictions including all of the G20 jurisdictions plus 104 others. Eventually, the plan is to have a profile for every jurisdiction that has adopted IFRSs or is on a program towards adopting IFRSs.