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 [
1].
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 Statementsâ€"stating basic principles and grounds of IFRS
*
IASâ€"standards issued before 2001
*
IFRSâ€"standards issued after 2001
*
SICâ€"interpretations of accounting standards, giving specific guidance on unclear issues
*
IFRICâ€"newer interpretations, issued after 2001
IFRS are used in many parts of the world, including the
European Union,
Russia,
South Africa,
Hong Kong,
Australia, and
Singapore. 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 2004â€"Prepare under pre IFRS standards and state in notes the expected effect of the adoption of IFRS
* Year ended
30 June 2005â€"Prepare under pre IFRS standards and prepare a reconciliation to IFRS standards
* Year ended
30 June 2005â€"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 IFRSâ€"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
IAS 39: 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
national accounting standards with IFRS since 1998. Until 2005, only financial institutions were required to prepare IFRS reports. The Central Bank oversaw a full transition to IFRS during 2005.
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.
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:
*
IFRS 1 First-time Adoption of International Financial Reporting Standards*
IFRS 2 Share-based Payment*
IFRS 3 Business Combinations*
IFRS 4 Insurance Contracts*
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations*
IFRS 6 Exploration for and Evaluation of Mineral Resources*
IFRS 7 Financial Instruments: Disclosures*
IAS 1: Presentation of Financial Statements*
IAS 2: Inventories*
IAS 7: Cash Flow Statements *
IAS 8: Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Practices*
IAS 10: Events After the Balance Sheet Date*
IAS 11: Construction Contracts*
IAS 12: Income Taxes*
IAS 14: Segment Reporting*
IAS 15: Information Reflecting the Effects of Changing Prices*
IAS 16: Property, Plant and Equipment*
IAS 17: Leases*
IAS 18: Revenue*
IAS 19: Employee Benefits*
IAS 20: Accounting for Government Grants and Disclosure of Government Assistance*
IAS 21: The Effects of Changes in Foreign Exchange Rates*
IAS 22: Business Combinations*
IAS 23: Borrowing Costs*
IAS 24: Related Party Disclosures*
IAS 26: Accounting and Reporting by Retirement Benefit Plans*
IAS 27: Consolidated Financial Statements*
IAS 28: Investments in Associates*
IAS 29: Financial Reporting in Hyperinflationary Economies*
IAS 30: Disclosures in the Financial Statements of Banks and Similar Financial Institutions*
IAS 31: Financial Reporting of Interests in Joint Ventures*
IAS 32: Financial Instruments: Disclosure and Presentation*
IAS 33: Earnings per Share*
IAS 34: Interim Financial Reporting*
IAS 35: Discontinuing Operations*
IAS 36: Impairment of Assets*
IAS 37: Provisions, Contingent Liabilities and Contingent Assets*
IAS 38: Intangible Assets*
IAS 39: Financial Instruments: Recognition and Measurement*
IAS 40: Investment Property*
IAS 41: Agriculture* 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.
*
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
