International Financial Reporting Standards

The field of financial reporting in India has seen major changes in the last 5 years. As the trade increasingly moves beyond the national boundaries, the compliance and reporting requirements move too. Presenting the financial statements of an entity in accordance with the reporting requirements of every country it has a presence in, is becoming increasingly difficult.

What is IFRS?

The International Financial Reporting Standards (IFRS) are accounting standards that are issued by the International Accounting Standards Board (IASB) with the objective of providing a common accounting language to increase transparency in the presentation of financial information.

What is IASB?

The International Accounting Standards Board (IASB), is an independent body formed in 2001 with the sole responsibility of establishing the International Financial Reporting Standards (IFRS). It succeeded the International Accounting Standards Committee (IASC), which was earlier given the responsibility of establishing the international accounting standards. IASB is based in London. It has also provided the ‘Conceptual Framework for Financial Reporting’ issued in September 2010 which provides a conceptual understanding and the basis of the accounting practices under IFRS.

Components of Financial Statements under IFRS

A complete set of financial statements prepared in compliance with the IFRS would ideally comprise of the following:

• A statement of financial position as at the end of the period – more commonly known to us as the ‘Balance sheet’.
• A statement of profit and loss for the year and the statement of other comprehensive income – Other comprehensive income would include those items of income/expense that are not recognized in the profit and loss account to comply with the other relevant standards.

Both these statements may either be combined or shown separately.

• A statement of changes in equity – This would include a reconciliation between amounts shown at the beginning and the end of the year.
• A statement of cash flows for the period
• Notes to the financial statements – including a summary of significant accounting policies followed and other explanatory information

The financial statements would sometimes also include a statement of the financial position of an earlier period in the following scenarios:

• When an entity applies an accounting policy retrospectively;
• When an entity retrospectively restated an item in its financial statements; or
• When an entity reclassifies an item in its financial statements.

List of International Financial Reporting Standards (IFRS)

As already discussed, the Standards issued by the IASB are called IFRS. The predecessor body, IASC, had however already issued certain International Standards which are called International Accounting Standards (IAS). These IAS were issued by the IASC between 1973 and 2001. Both IAS and the IFRS continue to be in force. The standards are listed below: