An overview of IFRS
Abstract
International Financial Reporting Standards (IFRS) shaped the Accounting Framework in terms of measurement, recognition, presentation and revelation transactional requirement as well as articles reflected in the financial statements. It employs a uniform, single consistent accounting framework that is gravitating towards General Accepted Accounting Practice (GAPP) in the future.
Introduction
The concept of IFRS was come into being in the year 2001 by the International Accounting Standard Board (IASB) in the public interest to provide a single set of understandable, high quality and uniform accounting standards. As the world virtually became a village where real time activities every where is reflected globally, users of accounting information need a proper way to understand and analyse the financial data seamlessly.
However, despite its main purpose of establishment, the IFRS still under paranoid in some countries, as it confused with the existing system currently in practice in such countries.
OVERVIEW OF IFRS
According to the IAS 1.14, the IFRS overview including environmental reports, management financial reviews, and value added statements. The following are the general features in IFRS:
Fair presentation and compliance with IFRS
Fair presentation that is consistent with transactions criteria for assets, liabilities, income and expenses set out in the Framework of IFRS.
Going concern:
Going Concern basis is present in financial statements except if management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.
Accrual basis of accounting:
An entity are to be recognize items in class of assets, liabilities, equity, income and expenses when they satisfy the definition and recognition criteria for those elements in the Framework of IFRS.
Materiality and aggregation:
All materials that are similar are presented separately.
Offsetting
Offsetting is not allowed explicitly in IFRS.
Frequency of reporting:
IFRS requires that at least annually a complete set of financial statements is presented.
Comparative information:
IFRS requires entities to present comparative information in respect of the preceding period for all amounts reported in the current period's financial statements.
Consistency of presentation:
IFRS requires that the presentation and classification of items in the financial statements is retained from one period to its precede.
Achievements of IFRS
During the American Accouting Association (AAA) in 2013, one of the IASB Board member, Chung Woo Suh, highlighted the main achievements of IFRS at that year. Which include its adoption in many countries, which means that their economies are now connected internationally for driving the comparability of issuing information. Also, teaching accounting subject is now easier and cheaper, students are able to master it quickly. And this is significant as the world’s brightest accounting minds are focused on IFRS. But it needs support to realize its ambition of being truly global.
BENEFITS OF IFRS
Companies especially listed will derive a lot of benefits in IFRS. It will help companies to be presence globally with only one single publication of information. Streaming of financial information will be seamless, hassle free and faster. Also reporting cost will be reduce to the minimal.
Another benefit of IFRS is that, it will enable comparison and analysis with foreign competitors easily.
Also adoption of IFRS will transcend national boundaries/cross border, acquisitions and joint venture will be made possible and there will also be easy access to foreign capital and exchange.
In addition time and money will be saved by international accounting firms in planning of accounting and audits. Tax assessment, payment and collection is also easy under IFRS concept. Therefore, the system is imperative for every company and every nations worldwide so that they could derive maximum benefits once the adopt it.
CRITICISMS OF IFRS
Most of the criticisms are the inability for US and other countries in G20 are yet to adopt the IFRS. Critical thinkers assume that it is horrible for the U.S. capital markets that would put the SEC in the position of just one of hundreds of constituents the IASB would try to keep happy, meaning the SEC would not be able to fulfill its statutory responsibility for protecting and intensification of U.S. capital markets.
Also they criticized the model which has flaw and is not capable of delivering on its promised goal, that of uniform accounting across the vast expanse of all political, economic, legal, and cultural systems.
It has been said that, IFRS system is unable to control hyperinflation as the case study of Zambia. It lacks indexing system that will counter attack hyperinflation and yet it has not been corrected.
COUNTRIES THAT ADOPTED THE SYSTEM
IFRS are used in many parts of the world, which include the European Union, South Africa, Australia, Hong Kong, Pakistan, India, Malaysia, GCC countries, Russia, Chile, Singapore and Turkey.
In Nigeria, the Federal Executive Council (FEC) in July, 2010, accepted the recommendation of the Committee on the Roadmap to the Adoption of IFRS in a phased transition. Institute of Chartered Accountant of Nigeria (ICAN) and Nigerian Accounting Standard Board (NASB) were set up a committee to map out strategies for adopting IFRS. It is also scheduled that some government agencies will be required to adopt by 2015.
In summary, over one hundred and twenty eight (as at June, 2014) countries permit IFRS system.
COUNTRIES THAT ARE YET TO ADOPT IFRS
However, there some countries that currently considering adopting IFRS. They include, United States, Japan and Colombia.
During the recent conference on the future of financial reporting hosted by the United States Chamber of Commerce, the Chief Accountant at the Securities and Exchange Commission (SEC) , Mr Jim Schnurr, provided some insights into the possible way forward for International Financial Reporting Standards (IFRSs) in the United States, suggesting that another approach to IFRS in the United States may be forthcoming in the near future.
REASONS FOR NOT ADOPTING THE SYSTEM
Many reasons have been postulate as why such countries not yet adopted the system. Below is just mention but few:
Cost of initial set up is relatively higher for switching from GAAP to IFRS will prove to be very expensive for the country. Training and development, research and necessary expenses like the software designing are involved in the process. Therefore, the adoption is not only matter but the budget required for the convergence.
Comparability of financial statements is another important point considered by the country. With the IFRS, the comparability between financial statements may not be achieved unless by special assessment.
IFRS financial statements are not at par with the quality of GAAP financial statements. Efforts are still being making to equalize IFRS with GAAP. Till this happens, most of the countries stick to GAAP.
If the IFRS is implemented, it apparently means there will be more scope for explanation with regards to financial statements.
Conclusion
The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. IFRS reporting standards gives more room for common reporting language across the globe.
REFERENCES
Obazee, Jim Osayande (2009): “Enhancing Enforcement of Accounting Standards in Nigeria and Efforts at Aligning with International Standards”, Seminar for Lecturers of Accounting and Related By Nigerian Accounting Standards Board, pp 74-79.
Oyedele, Taiwo (2010): “Taxation Implications of IFRS Conversion for Companies Operating in Nigeria”, Leadership Newspaper, Mar 14, 2014, http://leadership.ng/business/355134/tax-implications-adoption-ifrs-part-1
http://www.pwc.com/en_US/us/issues/ifrs-reporting/publications/assets/pwc-ifrs-by-country-2014.pdf
http://www.iasplus.com/en/standards/ias/ias1
OVERVIEW OF IFRS
An overview of IFRS
Abstract
International Financial Reporting Standards (IFRS) shaped the Accounting Framework in terms of measurement, recognition, presentation and revelation transactional requirement as well as articles reflected in the financial statements. It employs a uniform, single consistent accounting framework that is gravitating towards General Accepted Accounting Practice (GAPP) in the future.
Introduction
The concept of IFRS was come into being in the year 2001 by the International Accounting Standard Board (IASB) in the public interest to provide a single set of understandable, high quality and uniform accounting standards. As the world virtually became a village where real time activities every where is reflected globally, users of accounting information need a proper way to understand and analyse the financial data seamlessly.
However, despite its main purpose of establishment, the IFRS still under paranoid in some countries, as it confused with the existing system currently in practice in such countries.
OVERVIEW OF IFRS
According to the IAS 1.14, the IFRS overview including environmental reports, management financial reviews, and value added statements. The following are the general features in IFRS:
Fair presentation and compliance with IFRS
Fair presentation that is consistent with transactions criteria for assets, liabilities, income and expenses set out in the Framework of IFRS.
Going concern:
Going Concern basis is present in financial statements except if management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.
Accrual basis of accounting:
An entity are to be recognize items in class of assets, liabilities, equity, income and expenses when they satisfy the definition and recognition criteria for those elements in the Framework of IFRS.
Materiality and aggregation:
All materials that are similar are presented separately.
Offsetting
Offsetting is not allowed explicitly in IFRS.
Frequency of reporting:
IFRS requires that at least annually a complete set of financial statements is presented.
Comparative information:
IFRS requires entities to present comparative information in respect of the preceding period for all amounts reported in the current period's financial statements.
Consistency of presentation:
IFRS requires that the presentation and classification of items in the financial statements is retained from one period to its precede.
Achievements of IFRS
During the American Accouting Association (AAA) in 2013, one of the IASB Board member, Chung Woo Suh, highlighted the main achievements of IFRS at that year. Which include its adoption in many countries, which means that their economies are now connected internationally for driving the comparability of issuing information. Also, teaching accounting subject is now easier and cheaper, students are able to master it quickly. And this is significant as the world’s brightest accounting minds are focused on IFRS. But it needs support to realize its ambition of being truly global.
BENEFITS OF IFRS
Companies especially listed will derive a lot of benefits in IFRS. It will help companies to be presence globally with only one single publication of information. Streaming of financial information will be seamless, hassle free and faster. Also reporting cost will be reduce to the minimal.
Another benefit of IFRS is that, it will enable comparison and analysis with foreign competitors easily.
Also adoption of IFRS will transcend national boundaries/cross border, acquisitions and joint venture will be made possible and there will also be easy access to foreign capital and exchange.
In addition time and money will be saved by international accounting firms in planning of accounting and audits. Tax assessment, payment and collection is also easy under IFRS concept. Therefore, the system is imperative for every company and every nations worldwide so that they could derive maximum benefits once the adopt it.
CRITICISMS OF IFRS
Most of the criticisms are the inability for US and other countries in G20 are yet to adopt the IFRS. Critical thinkers assume that it is horrible for the U.S. capital markets that would put the SEC in the position of just one of hundreds of constituents the IASB would try to keep happy, meaning the SEC would not be able to fulfill its statutory responsibility for protecting and intensification of U.S. capital markets.
Also they criticized the model which has flaw and is not capable of delivering on its promised goal, that of uniform accounting across the vast expanse of all political, economic, legal, and cultural systems.
It has been said that, IFRS system is unable to control hyperinflation as the case study of Zambia. It lacks indexing system that will counter attack hyperinflation and yet it has not been corrected.
COUNTRIES THAT ADOPTED THE SYSTEM
IFRS are used in many parts of the world, which include the European Union, South Africa, Australia, Hong Kong, Pakistan, India, Malaysia, GCC countries, Russia, Chile, Singapore and Turkey.
In Nigeria, the Federal Executive Council (FEC) in July, 2010, accepted the recommendation of the Committee on the Roadmap to the Adoption of IFRS in a phased transition. Institute of Chartered Accountant of Nigeria (ICAN) and Nigerian Accounting Standard Board (NASB) were set up a committee to map out strategies for adopting IFRS. It is also scheduled that some government agencies will be required to adopt by 2015.
In summary, over one hundred and twenty eight (as at June, 2014) countries permit IFRS system.
COUNTRIES THAT ARE YET TO ADOPT IFRS
However, there some countries that currently considering adopting IFRS. They include, United States, Japan and Colombia.
During the recent conference on the future of financial reporting hosted by the United States Chamber of Commerce, the Chief Accountant at the Securities and Exchange Commission (SEC) , Mr Jim Schnurr, provided some insights into the possible way forward for International Financial Reporting Standards (IFRSs) in the United States, suggesting that another approach to IFRS in the United States may be forthcoming in the near future.
REASONS FOR NOT ADOPTING THE SYSTEM
Many reasons have been postulate as why such countries not yet adopted the system. Below is just mention but few:
Cost of initial set up is relatively higher for switching from GAAP to IFRS will prove to be very expensive for the country. Training and development, research and necessary expenses like the software designing are involved in the process. Therefore, the adoption is not only matter but the budget required for the convergence.
Comparability of financial statements is another important point considered by the country. With the IFRS, the comparability between financial statements may not be achieved unless by special assessment.
IFRS financial statements are not at par with the quality of GAAP financial statements. Efforts are still being making to equalize IFRS with GAAP. Till this happens, most of the countries stick to GAAP.
If the IFRS is implemented, it apparently means there will be more scope for explanation with regards to financial statements.
Conclusion
The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. IFRS reporting standards gives more room for common reporting language across the globe.
REFERENCES
Obazee, Jim Osayande (2009): “Enhancing Enforcement of Accounting Standards in Nigeria and Efforts at Aligning with International Standards”, Seminar for Lecturers of Accounting and Related By Nigerian Accounting Standards Board, pp 74-79.
Oyedele, Taiwo (2010): “Taxation Implications of IFRS Conversion for Companies Operating in Nigeria”, Leadership Newspaper, Mar 14, 2014, http://leadership.ng/business/355134/tax-implications-adoption-ifrs-part-1
http://www.pwc.com/en_US/us/issues/ifrs-reporting/publications/assets/pwc-ifrs-by-country-2014.pdf
http://www.iasplus.com/en/standards/ias/ias1
Abstract
International Financial Reporting Standards (IFRS) shaped the Accounting Framework in terms of measurement, recognition, presentation and revelation transactional requirement as well as articles reflected in the financial statements. It employs a uniform, single consistent accounting framework that is gravitating towards General Accepted Accounting Practice (GAPP) in the future.
Introduction
The concept of IFRS was come into being in the year 2001 by the International Accounting Standard Board (IASB) in the public interest to provide a single set of understandable, high quality and uniform accounting standards. As the world virtually became a village where real time activities every where is reflected globally, users of accounting information need a proper way to understand and analyse the financial data seamlessly.
However, despite its main purpose of establishment, the IFRS still under paranoid in some countries, as it confused with the existing system currently in practice in such countries.
OVERVIEW OF IFRS
According to the IAS 1.14, the IFRS overview including environmental reports, management financial reviews, and value added statements. The following are the general features in IFRS:
Fair presentation and compliance with IFRS
Fair presentation that is consistent with transactions criteria for assets, liabilities, income and expenses set out in the Framework of IFRS.
Going concern:
Going Concern basis is present in financial statements except if management either intends to liquidate the entity or to cease trading, or has no realistic alternative but to do so.
Accrual basis of accounting:
An entity are to be recognize items in class of assets, liabilities, equity, income and expenses when they satisfy the definition and recognition criteria for those elements in the Framework of IFRS.
Materiality and aggregation:
All materials that are similar are presented separately.
Offsetting
Offsetting is not allowed explicitly in IFRS.
Frequency of reporting:
IFRS requires that at least annually a complete set of financial statements is presented.
Comparative information:
IFRS requires entities to present comparative information in respect of the preceding period for all amounts reported in the current period's financial statements.
Consistency of presentation:
IFRS requires that the presentation and classification of items in the financial statements is retained from one period to its precede.
Achievements of IFRS
During the American Accouting Association (AAA) in 2013, one of the IASB Board member, Chung Woo Suh, highlighted the main achievements of IFRS at that year. Which include its adoption in many countries, which means that their economies are now connected internationally for driving the comparability of issuing information. Also, teaching accounting subject is now easier and cheaper, students are able to master it quickly. And this is significant as the world’s brightest accounting minds are focused on IFRS. But it needs support to realize its ambition of being truly global.
BENEFITS OF IFRS
Companies especially listed will derive a lot of benefits in IFRS. It will help companies to be presence globally with only one single publication of information. Streaming of financial information will be seamless, hassle free and faster. Also reporting cost will be reduce to the minimal.
Another benefit of IFRS is that, it will enable comparison and analysis with foreign competitors easily.
Also adoption of IFRS will transcend national boundaries/cross border, acquisitions and joint venture will be made possible and there will also be easy access to foreign capital and exchange.
In addition time and money will be saved by international accounting firms in planning of accounting and audits. Tax assessment, payment and collection is also easy under IFRS concept. Therefore, the system is imperative for every company and every nations worldwide so that they could derive maximum benefits once the adopt it.
CRITICISMS OF IFRS
Most of the criticisms are the inability for US and other countries in G20 are yet to adopt the IFRS. Critical thinkers assume that it is horrible for the U.S. capital markets that would put the SEC in the position of just one of hundreds of constituents the IASB would try to keep happy, meaning the SEC would not be able to fulfill its statutory responsibility for protecting and intensification of U.S. capital markets.
Also they criticized the model which has flaw and is not capable of delivering on its promised goal, that of uniform accounting across the vast expanse of all political, economic, legal, and cultural systems.
It has been said that, IFRS system is unable to control hyperinflation as the case study of Zambia. It lacks indexing system that will counter attack hyperinflation and yet it has not been corrected.
COUNTRIES THAT ADOPTED THE SYSTEM
IFRS are used in many parts of the world, which include the European Union, South Africa, Australia, Hong Kong, Pakistan, India, Malaysia, GCC countries, Russia, Chile, Singapore and Turkey.
In Nigeria, the Federal Executive Council (FEC) in July, 2010, accepted the recommendation of the Committee on the Roadmap to the Adoption of IFRS in a phased transition. Institute of Chartered Accountant of Nigeria (ICAN) and Nigerian Accounting Standard Board (NASB) were set up a committee to map out strategies for adopting IFRS. It is also scheduled that some government agencies will be required to adopt by 2015.
In summary, over one hundred and twenty eight (as at June, 2014) countries permit IFRS system.
COUNTRIES THAT ARE YET TO ADOPT IFRS
However, there some countries that currently considering adopting IFRS. They include, United States, Japan and Colombia.
During the recent conference on the future of financial reporting hosted by the United States Chamber of Commerce, the Chief Accountant at the Securities and Exchange Commission (SEC) , Mr Jim Schnurr, provided some insights into the possible way forward for International Financial Reporting Standards (IFRSs) in the United States, suggesting that another approach to IFRS in the United States may be forthcoming in the near future.
REASONS FOR NOT ADOPTING THE SYSTEM
Many reasons have been postulate as why such countries not yet adopted the system. Below is just mention but few:
Cost of initial set up is relatively higher for switching from GAAP to IFRS will prove to be very expensive for the country. Training and development, research and necessary expenses like the software designing are involved in the process. Therefore, the adoption is not only matter but the budget required for the convergence.
Comparability of financial statements is another important point considered by the country. With the IFRS, the comparability between financial statements may not be achieved unless by special assessment.
IFRS financial statements are not at par with the quality of GAAP financial statements. Efforts are still being making to equalize IFRS with GAAP. Till this happens, most of the countries stick to GAAP.
If the IFRS is implemented, it apparently means there will be more scope for explanation with regards to financial statements.
Conclusion
The objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. IFRS reporting standards gives more room for common reporting language across the globe.
REFERENCES
Obazee, Jim Osayande (2009): “Enhancing Enforcement of Accounting Standards in Nigeria and Efforts at Aligning with International Standards”, Seminar for Lecturers of Accounting and Related By Nigerian Accounting Standards Board, pp 74-79.
Oyedele, Taiwo (2010): “Taxation Implications of IFRS Conversion for Companies Operating in Nigeria”, Leadership Newspaper, Mar 14, 2014, http://leadership.ng/business/355134/tax-implications-adoption-ifrs-part-1
http://www.pwc.com/en_US/us/issues/ifrs-reporting/publications/assets/pwc-ifrs-by-country-2014.pdf
http://www.iasplus.com/en/standards/ias/ias1
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