International Financial Reporting Standards

Considered the standard interpretation of finance laws and ethics, the International Financial Reporting Standards (IFRS) are found in all industrialized nations where finance and accounting industries play a major part in the nation’s economy. The independent London-based International Accounting Standards Board established in April 2001 is the committee which adopts these standards into practice. Officially, the IFRS are identified as a ''principles-based set of standards in that they establish broad rules as well as dictating specific treatments.''

The major financial centers of each continent apply these standards. This includes Hong Kong, Singapore, Russia, India, Australia, South Africa, and the European Union. The IFRS financial statements used in most standard-abiding nations must consist of the following statements:

Balance
Income
Changes in equity or recognized income/expense
Cash flow
Summary of major accounting practices

There are some notable differences among nations practicing these established accounting standards. The official standards in Australia, for example, are the result of a concerted effort by national industry leaders to merge what are known as Australian Standards and the IFRS. Russia, which is notorious for its lack of uniformity in financial reporting and practices, has been moving steadily toward full implementation of the IFRS, though there has been measured resistance by those who prefer the traditional method of unmonitored accounting. The minister of finance of the Russian Federation has been making steady progress toward reconciling the differences between the IFRS and national Russian standards with the goal being full implementation by 2011.

Turkey, meanwhile, introduced the system in 2006 to its financial networks. As of December 31, 2006, all Turkish companies belonging to the Istanbul Stock Exchange are required to prepare IFRS reports. The United States is also working toward reducing the gap between the IFRS and the U.S. GAAP (Generally Accepted Accounting Principles), which began in 2002.

IFRS statements can be used in virtually every financial and accounting matter, though the most common instances include:

Accounting for government grants and disclosure of government assistance
Accounting and reporting by retirement benefit plans
Business combinations
Inventories
Cash flow statements
Income taxes
Leases
Revenue
Employee benefits
Earnings per share
Provisions, contingent liabilities, and contingent assets
Intangible assets
Financial instruments: recognition and measurement
Investment property
Agriculture
Construction contracts

According to the Framework for the Preparation and Presentation of Financial Statements, the preparation of such financial statements in accordance with the IFRS is contingent upon two underlying assumptions:

Accrual basis: The effects of transactions and other events are recognized when they occur, not as cash is received or paid.
Going concern: The financial statements are prepared on the basis that an entity is a going concern (a business functioning without the intention or threat of liquidation for at least the next 12 months) and will continue in operation for the foreseeable future.

Proper financial statements are qualitatively measured according to four key measurements: understandability, relevance, reliability, and comparability. The elements within such financial statements, according to the Framework, are assets, liabilities, equity, income, and expenses.

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International Financial Reporting Standards