Definition of IFRS & how it affects transactions
International Financial Reporting Standards IFRS is a set of accounting rules that outlines how financial information should be processed and reported in financials.
IFRS has enabled the global community to have a common accounting language with accounting. It promotes consistency, credibility and comparison of financial information.
The standard covers various areas of tax and accounting like fixed assets, various taxes, revenue and expense recognition, disclosure and reporting.
IFRS standards are used across the globe.
The IFRS is a principles based standard is used by the issued by the International Accounting Standards Board (IASB).
Prior to IFRS the dominant standard used to be GAAP Generally Accepted Accounting principles. GAAP is a rule based approach. GAAP and IFRS
IFRS covers the various areas of financial transactions as they affect the:
- Statement of Changes in Financial Position (previously referred to as the Balance sheet)
- Statement of changes in equity
- Statement of Comprehensive Income
- Statement of Cash Flows
Frequently asked questions
What is IFRS in simple terms
A collection of standards that govern how transactions have to handled. IFRS also outlines how to report on the data.
What are the 4 principle of IFRS
Financial statements must satisfy:
- Clarity
- Relevance
- Reliability
- Comparability
How many IFRS Standards are there
Currently there are 16 Standards that have been issued by IASB.
Why is IFRS important
IFRS provides a standard where you can compare financial transactions on an apples for apples basis. It becomes even more important when you are comparing entities. With this standard you can now compare the performance of entities based on these criteria.
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