Demystifying IFRS: Essential Insights You Need to Know
For beginners, IFRS is really a difficult challenge with over 3,000 pages of English documents, written in an academic language.
History of IFRS
With the explosion of the global economy after World War II and the growth of multinational corporations, there was a need for a universal accounting language. This led to the creation of the International Accounting Standards Committee (IASC), a consortium of nine original member countries including Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, and the United Kingdom. Great Britain/Northern Ireland and the United States. A major turning point for the IASC was the recognition by the International Organization of Securities Commissions (IOSCO) in 2000 that it issued a recommendation to member stock exchanges to allow or require listed companies to follow the 10 basics International Accounting Standards (IAS) at the time. This led to IAS becoming one of the mandatory requirements for listing on the world's major stock exchanges. In terms of operational organization, the IASC is merely an alliance instead of operating as a true "committee". After nearly 25 years of operation, in 1997, IASC realized that in order to continue to perform its role effectively, it had to find ways to bring about consolidation between accounting standards and practices in different countries. with global accounting standards. To do that, the IASC needs to reorganize its operations.
As a result, on April 1, 2001, the new International Accounting Standards Board (IASB) was born to replace the old IASC. In its first meeting, the IASB adopted the old International Accounting Standards (IAS) issued by the IASC and the Guidelines from the Accounting Standards Interpretation Committee (SIC). The IASB has since continued to develop new Standards and named them International Financial Reporting Standards (IFRS). After the recognition of IOSCO in 2000, another important step for IFRS was the mandatory application of IFRS in Europe under EC Directive 1606 which was approved by the European Parliament in July 2002. By regulation of this Directive, all members of the European Union and members of the European Economic Area (EEA) are required to apply IFRS on the financial statements of listed enterprises starting from the year ended December 31, 2005. Currently, IFRS has grown worldwide and according to the data published by the IASB, there are now 131/143 countries and territories (accounting for 93% of the countries surveyed by the IASB) that have declared about this allowing the application of IFRS in different forms. In many countries, IFRS has replaced all National Accounting Standards to facilitate the attraction of global investors.
IFRS issued by whom?
The IFRS Foundation is the organization behind the development and development of the IFRS Standards. This Foundation operates as a not-for-profit and public interest organization, incorporated under the laws of the State of Delaware, USA but registered as an offshore company in England and Wales with its head office. located in London, UK.
Management
The Oversight Board was established in January 2009 with the aim of establishing a formal link between the Trustees of the IFRS Foundation and public interest regulatory agencies to increase accountability for the IFRS Foundation. the public interest of the IFRS Foundation. It is the responsibility of the Oversight Board to ensure that the Trustees of the IFRS Foundation fulfill their obligations as defined in the Foundation's Constitution and to approve the appointment or re-appointment of the Trustees. The Oversight Board meets with the Trustees at least once a year or more often as appropriate. Members of the Supervisory Board include representatives of capital market regulatory agencies responsible for the form and content of financial statements such as the Emerging Markets Committee of the Organization of the National Securities Commission. (IOSCO), European Commission (EC), Japan Financial Services Authority (JFSA), United States Securities Commission (SEC), Brazilian Securities Commission (CVM), Financial Services Commission Korea (FSC), and Ministry of Finance of China. Basel's Banking Supervision Committee joins the Supervisory Board as an observer. Through the operation of the Supervisory Board, securities regulators can more effectively carry out their responsibilities to protect the interests of investors and the integrity of capital markets.
Member of IFRS Founders
The Trustees are responsible for the management and oversight of the IFRS Foundation and the International Accounting Standards Board (IASB). The Trustees are not involved in any technical aspects related to the IFRS Standards. The Trustees are accountable to the Fund Supervisory Board. The Trustees are appointed for a term of 3 years and can be reappointed.
International Standards Committee
The Committee is composed of a group of independent experts from a wide range of disciplines, such as experts with experience in the field of accounting standards development, auditors, accounting training specialists, and experts in the preparation and financial reporting practice. In addition, according to the provisions of the IFRS Foundation Constitution, experts must also come from different geographical regions. Committee members are responsible for developing and publishing IFRS Standards including the IFRS Standards for Small and Medium Enterprises. The Committee is also responsible for approving the IFRS Guidelines developed by the International Financial Reporting Standards Interpretation Committee (IFRIC). The members of the Committee are appointed by the Trustees of the Foundation through open and rigorous recruitment programs.
The International Financial Reporting Standards Committee (IFRIC) is the guiding body of the International Financial Reporting Standards Board (IASB). IFRIC is responsible for answering questions regarding the application of the Standards and for performing other work as required by the IASB. IFRIC consists of 14 members appointed by the Trustees of the Foundation. These members include experts with high expertise in the fields of international business and extensive experience in the application of the IFRS Standards. The importance of IFRS
IFRS is important to financial services and audits for a number of reasons:
1. Standardized financial statements
IFRS provides a standardized and globally recognized framework for financial reporting. This is important for financial services and audits because it ensures consistency and comparability in the presentation of financial statements. Standardization simplifies the audit process by providing a common set of rules and principles that auditors can rely on when examining financial records. IFRS provides a globally recognized and standardized framework for financial reporting.
2. Increased transparency
IFRS emphasizes transparency in financial reporting by requiring companies to provide clear, relevant, and reliable information. This is beneficial for financial services and audits as it improves the accuracy and completeness of financial reporting. Auditors can rely on the transparency provided by IFRS to more effectively assess the financial position and performance of companies. IFRS emphasizes transparency in financial reporting by requiring companies to provide clear, relevant and reliable information.
3. Facilitation of cross-border transactions
With the globalization of business activities, cross-border transactions are becoming more and more popular. IFRS facilitates these transactions by providing a common accounting language that crosses national borders. Auditing and financial services need to understand and apply IFRS to effectively deal with the complex issues associated with multinational companies and cross-border transactions.
IFRS facilitates cross-border transactions by providing a universally applicable accounting language
4. Ensure strict compliance and regulatory requirements with high quality
Many countries have adopted or converged their accounting standards with IFRS. Financial services and audits need to be proficient in IFRS to ensure compliance with regulatory requirements. They play an important role in helping companies comply with IFRS guidelines and help them prepare accurate financial statements that meet regulatory standards set by the competent authority.
Many countries have adopted or converged their accounting standards with IFRS.
5. Boost investor confidence and optimize decision-making
IFRS promotes transparency and comparability in financial reporting, which enhances investor confidence. Financial services and audits analyze and evaluate financial statements to provide insights and recommendations to investors. With the adoption of IFRS, financial professionals and auditors can provide more reliable information to investors, helping them make informed decisions about their investments.
IFRS promotes transparency and comparability in financial reporting, which enhances investor confidence.
6. Professional development and competitiveness
Finance and auditing professionals need to keep abreast of the latest developments in accounting standards to stay competitive in their fields. As IFRS is widely accepted and adopted internationally, IFRS knowledge and proficiency have become essential for professionals in the financial services and audit sectors. Staying up-to-date with IFRS ensures that professionals can deliver quality service and meet customer expectations.
IFRS facilitates professional development and competitiveness
In summary, IFRS is important for financial services and audits because it provides standardized financial reporting, enhances transparency, facilitates cross-border transactions, ensures compliance with regulatory requirements, enhances investor confidence, and contribute to the professional development and competitiveness of finance and audit professionals.