Overview of IFRS: The International Financial Reporting Standards

IFRS Accounting Standards are developed by the International Accounting Standards Board (IASB) an independent, not-for-profit organization that develops and approves International Financial Reporting Standards (IFRSs). The IASB established in 2001 operates under the oversight of the IFRS Foundation.

IFRS was created to establish a common accounting language that forms accounting rules for public companies to make company financial statements consistent, transparent, and easily comparable around the world. IFRS specifies how businesses need to maintain and report their accounts. 

The financial report prepared under IFRS specification helps to improve the quality and transparency of financial reporting, which can help build trust among investors and other stakeholders. IFRS is required for use by public companies in more than 140 jurisdictions, including all of the nations in the European Union, Canada, India, Russia, South Korea, South Africa, and Chile. This helps the goal of making financial statements coherent and consistent across different industries and countries. IFRS standards have replaced many national accounting standards, but the United States and some other countries still use their own accounting standards such as U.S. GAAP.

Benefits of IFRS:

The quality of individual countries’ audit standards and the resulting audits differ substantially worldwide. Therefore, high-quality audits followed by IFRSs are essential if the financial statements are to be regarded as reliable by investors and other users

Following different standards of different countries requires cross-border comparisons of companies. The magnitude of the costs to investors is sufficiently large in some cases to serve as an effective barrier to cross-border movements of capital. Harmonization should converge to the best possible standard, that is, the method that best reflects the underlying economics of transactions, rather than to any particular national standard

Using only one method for reporting similar transactions without depending on country, industry, size of company, or any other consideration, Investors, companies, and markets will benefit from the complete harmonization on a global basis of the differing national and supra-national standards.

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