What is IFRS? Information you need to know about IFRS in accounting

What is IFRS?

IFRS  stands for “ International Financial Reporting Standards ” , a set of accounting standards developed and maintained by the International Accounting Standards Board (IASB). IFRS provides the most general guidance and interpretation on how to prepare financial statements, how to measure, classify and present financial information in a business. IFRS was born with the goal of creating a global accounting language , helping financial statements no longer differentiate between countries and territories, becoming transparent, unified and reliable.

The Development of IFRS

IFRS was formed and developed in the early 1970s, stemming from the need to "harmonize" accounting standards worldwide. Over time, many countries have realized the benefits of adopting IFRS, leading to widespread adoption across continents. According to IASB statistics in 2018, more than 140 countries and territories, including countries in the European Union, Australia and Canada, have fully or partially adopted International Financial Reporting Standards - IFRS .

Objectives and principles of IFRS

The main objective of IFRS is to provide relevant, reliable and comparable financial information for decision making. The main principles of IFRS include fair presentation , substance over form and accrual basis of accounting . IFRS focuses on transparency, disclosure and the use of professional judgment to accurately reflect economic transactions.

Importance of IFRS

After understanding “What is IFRS? ”, we can partly understand why people involved in the financial and business fields today are interested in and learning about IFRS. Below are some points that clarify the importance of International Financial Reporting Standards - IFRS .

1. Global Consistency: IFRS promotes global consistency in financial reporting, making it easier for investors, analysts and other stakeholders to compare financial statements across different companies and countries. This consistency enhances investor confidence and facilitates cross-border business and investment transactions.
2. Improved transparency: IFRS requires companies to provide detailed information and disclosures, allowing users of financial statements to gain a comprehensive understanding of a company’s financial position, performance and risks. This transparency helps investors make informed decisions and contributes to improved market performance. 
3. Facilitates international business: With the increasing globalization of business, companies often operate in multiple countries. Using IFRS simplifies financial reporting for multinational corporations, streamlines regulatory compliance, and reduces the costs associated with maintaining multiple accounting standards. 
4. Increased Capital Attractiveness: Companies that adopt IFRS benefit from increased access to global capital markets. Many investors and lenders prefer financial statements prepared in accordance with IFRS because of their comparability and transparency. Therefore, adopting IFRS can enhance a company’s reputation and attractiveness to potential investors.