The impact of IFRS adoption together with continued amendments to the standards stretches far beyond accounting and financial reporting to affect key business decisions. Access to up-to-date guidance and timely advice are essential as IFRS is adopted in many more countries, or new and revised standards are implemented. Consistent interpretation and application is also vital for companies operating in a global environment.

What is IFRS?

IFRS is short for International Financial Reporting Standards. IFRS is the international accounting framework within which to properly organize and report financial information. It is derived from the pronouncements of the London-based International Accounting Standards Board (IASB). It is currently the required accounting framework in more than 120 countries. IFRS requires businesses to report their financial results and financial position using the same rules; this means that, barring any fraudulent manipulation, there is considerable uniformity in the financial reporting of all businesses using IFRS, which makes it easier to compare and contrast their financial results.

IFRS is used primarily by businesses reporting their financial results anywhere in the world except the United States. Generally Accepted Accounting Principles, or GAAP is the accounting framework used in the United States. GAAP is much more rules-based than IFRS. IFRS focuses more on general principles than GAAP, which makes the IFRS body of work much smaller, cleaner, and easier to understand than GAAP.

IFRS covers a broad array of topics, including:

  • Presentation of financial statements
  • Revenue recognition
  • Employee benefits
  • Borrowing costs
  • Income taxes
  • Investment in associates
  • Inventories

IFRS covers a broad array of topics, including:

  • Fixed assets
  • Intangible assets
  • Leases
  • Retirement benefit plans
  • Business combinations
  • Foreign exchange rates
  • Operating segments
  • Subsequent events

Industry-specific accounting, such as mineral resources and agriculture

There are several working groups that are gradually reducing the differences between the GAAP and IFRS accounting frameworks, so eventually, there should be minor differences in the reported results of a business if it switches between the two frameworks. There is a stated intent to eventually merge GAAP into IFRS, but this has not yet occurred.

There will be a reduced cost for companies once the two accounting frameworks are more closely aligned since they will not have to pay to have their financial statements restated to show results under the other framework in cases where they need to report their results in locations where the other framework is required.