International Financial Reporting Standards

International Financial Reporting Standards (IFRS) along with International Accounting Standards (IAS) are a set of accounting standards. Currently they are issued by the International Accounting Standards Board (IASB).

IASs were issued between 1973 and 2001 by Board of the International Accounting Standards Committee (IASC). In April 2001 the IASB adopted all IASs and continued the development, calling new standards IFRSs ^*.

Although IASs are no longer produced, they are still in effect unless replaced by an IFRS, whether in its entirety or part of.

International Financial Reporting Standards in a broad sense comprise:

Framework for the Preparation and Presentation of Financial Statements—stating basic principles and grounds of IFRS

IAS—standards issued before 2001

IFRS—standards issued after 2001

SIC—interpretations of accounting standards, giving specific guidance on unclear issues

IFRIC—newer interpretations, issued after 2001

Adoption of IFRS

IFRS are used in many countries in the world, including Singapore, Hong Kong and Russia, member states of the European Union, Australia and South Africa. For a current overview see IAS PLUS's list of all countries that have adopted IFRS.

Australia

The Australian Accounting standards, previous to 1 January 2005, were based around accounting standards developed by the Australian Accounting Standards Board (AASB). As a result of pressure towards international harmonisation, the AASB had been working towards a convergence between the Australian Standards and the IFRS. From 1 January 2005, the Australian equivalent of IFRS have been fully implemented as AASB 101 - 141. It is a requirement that all reporting entities adopt the standards as they have replaced the previous Australian generally accepted accounting principles.

Due to the accounting standards operating halfway through the year, the requirements can be summarised as follows:

Year ended 30 June 2004—Prepare under pre IFRS standards and state in notes the expected effect of the adoption of IFRS
Year ended 30 June 2005—Prepare under pre IFRS standards and prepare a reconciliation to IFRS standards
Year ended 30 June 2005—Prepare under Australian Equivalents to IFRS standards

European Union

All publicly traded EU companies are required to prepare their consolidated accounts using IFRS from 2005. Prior to 2005 there were around 350 publicly listed companies that used IFRS—in 2005 the figure will be around 7,000.

In order to be approved for use in the EU, standards must be endorsed by the Accounting Regulatory Committee (ARC), which includes representatives of member state governments and is advised by a group of accounting experts known as the European Financial Reporting Advisory Group.

Two sections of Financial Instruments: Recognition and Measurement have not been approved by the ARC and in this respect IFRS as applied in the EU differs from that used elsewhere. The IASB is working with the EU to find a way to an acceptable way to remove this anomaly.

As the standards are part of European law the approved standards and approved subsequent changes must be published in the Official Journal of the European Union. On October 13th 2003 the first publication of the standards was included in PB L 261. Changes to the earlier published IAS and IFRS can be monitored using the webpage of the Directorate Internal Market of the European Union on the implementation of the IAS in the European Union.

Russia

The government of Russia has been implementing a program to harmonize its РПБУ with IFRS since 1998. As of 2004, only financial institutions are required to prepare IFRS reports.

Convergence with US GAAP

The largest capital market remaining with its own standards is the US. The United States Securities and Exchange Commission requires all overseas companies listed in the US to prepare their results under US GAAP in addition to their local requirements and to reconcile the two results. This imposes considerable expense on companies which are listed on exchanges both in the US and another country.

In 2002 at a meeting at Norwalk, Connecticut, the IASB and the US Financial Accounting Standards Board agreed to harmonise their agenda and work towards reducing differences between the two sets of standards. The SEC has indicated it will remove the reconciliation requirement once it is satisfied that IFRS are of a sufficient standard.

Details

IFRSs are considered a "principles-based" set of standards, in that they establish broad rules rather than dictating specific treatments. As of 2002 a number of IFRSs offer the preparer choices of treatments; the IASB's Improvements Project is seeking to reduce these choices.

International accounting standards currently in use are as follows:

References

International Accounting Standards Board (2006): International Financial Reporting Standards (IFRSs®) 2006 (including International Accounting Standards (IASs™) and Interpretations as at 1st January 2006), LexisNexis, ISBN 3-89699-305-4.

External Links

Discussion Forum IAS/IFRS

Initial publication of the International Accounting Standards in the Official Journal of the European Union PB L 261 13-10-2003

Directorate Internal Market of the European Union on the implementation of the IAS in the European Union