The International Financial Reporting Standards, or IFRS, are a set of accounting standards that were developed by the International Accounting Standards Board, or IASB. These standards are used in over 120 countries around the world, and they provide guidance on how financial statements should be prepared.
The framework is designed to promote comparability and transparency. It is important to note that the framework is not a set of rules. rather, it provides guidance on how financial statements should be prepared in accordance with IFRS.
The IFRS framework consists of four main pillars:
- Recognition and measurement
- Presentation and disclosure
- Principles of consolidation
- Accounting for taxes on income
Why is IFRS important?
The use of IFRS helps to promote the global comparability of financial statements. This, in turn, enhances the efficiency of capital markets. When investors can compare financial statements from different companies easily, they are able to make better informed investment decisions. Some of the most prominent principles of IFRS include:
- A focus on the substance of transactions, rather than their form
- Recognition and measurement in accordance with economic reality
- Prudent accounting
- Disclosures that enable users to understand the impact of transactions, events, and conditions on an entity's financial position, financial performance, and cash flows.
IFRS can help your company in several ways. First, it can help to promote the global comparability of your financial statements. This can make it easier for investors and other interested parties to understand your financial position. Additionally, IFRS can help to improve the transparency and disclosure of your financial statements. This can provide stakeholders with a better understanding of your company's finances. Some of the main functions of IFRS include:
- Providing a common framework for financial reporting
- Enhancing comparability of financial statements
- Improving transparency and disclosure
IFRS, in India is mandatory for listed companies and certain large unlisted public companies. For other entities, IFRS is permitted but not required.
How can my company transition to IFRS?
IFRS Services can help your company with the transition to IFRS. There are several firms that offer IFRS services. These firms can help you to ensure that your financial statements are in compliance with the IFRS.