International Financial Reporting Standards – IFRS
At the moment, there are a lot of accounting standards in practice around the globe. Generally, each country is using their own styles of generally recognized accounting principle which is also known as GAAP. As of April ’11 120 countries have adopted IFRS as an accounting standard and more countries are coming to it. This article will explain the background, benefits, objectives and the difference in between IFRS & GAAP (United States).
Background and Overview of IFRS:
IFRS is basically a combination of accounting standards (based on principles) recognized globally which states the process to report transactions and events in financial statements. IFRS is trending around the world and used in many countries around the globe like Hong Kong, Australia, Singapore, European Union, Russia. As I have mentioned that many countries are now switching to IFRS from GAAP, Canada has adopted this practice back in 2011 in the month of January. However, by the end of year 2012 USA was still using GAP and I am not sure about the current status.
Benefits of IFRS:
IFRS actually benefits both investors and users of financial statement and it also help in reducing the cost incurring on investments and likewise it helps in bringing the quality information. So, investors are much more confident in investing their money with transparency among multiple firms.
IFRS has four goals which are stated as below;
1. Developing transparent accounting standards with high level of transparency.
2. Encouraging accounting standards worldwide.
3. Needs of rising markets.
4. Joining the national accounting standards of different countries with global standards.
Impact of IFRS on Financial Statements
a) Differences in the Balance Sheet
c) Property and Equipment
e) Differences in the Income Statement
f) Revenue Differences in Regards to Construction Contracts
g) Cost of Goods Sold
h) Operating Expenses
i) Impact of IFRS on Financial Ratios
j) Deadlines for U.S. Adoption
k) The Bottom Line
This is just a summary of the article on IFRS. However, if you want to learn more about IFRS I recommend you to visit the relevant web page.