International Financial Reporting Standards (IFRS) - IFRS

accounting

The International Financial Reporting Standards (IFRS), known in English as IFRS (International Financial Reporting Standards), are a series of accounting principles and technical standards established by the IASB (International Accounting Standards Board) whose objective is to harmonize the accounting regulations to international level.

IFRS are a series of international standards or basic norms whose objective is to be applied worldwide, so that accounting is similar in all countries. Its predecessor is the IAS (International Accounting Standards), which had the same objective.

IFRS content

The content of IFRS is to establish the method for preparing the financial statements and the main objective of each of them. The financial statements proposed by IFRS are the following:

  • Statement of equity or balance sheet
  • Income statement or profit and loss account
  • Statement of evolution of equity and statement of comprehensive income
  • Cash flow statement
  • The explanatory notes of the previous statements or memory.

The elements that the previous statements must contain must be divided into five major assets: assets, liabilities, net worth, expense and income.

IFRS objective

We have already commented that the main objective of IFRS is to harmonize and unify accounting standards at the international level. This objective is sought since it has a series of benefits:

  • Allows you to use the same accounting and financial language
  • It allows to present comparable and transparent financial statements between different countries.
  • It implies greater ease of access to capital markets for companies. There is a larger market for potential investors, as they can come from all over the world.
  • It also allows greater ease in international expansion, since the regulations of other countries, which have traditionally been a barrier, are similar to that of the country of origin.

Adoption and compliance with IFRS

IFRS are standards made by a private institution and, therefore, there is no compliance obligation on the part of the States. However, the reality is that most countries have implemented the basic principles set out in IFRS.

States do not apply IFRS directly, but adapt their regulations based on these principles. Therefore, the internal regulations of each State have been modified in their basic aspects, following the guidelines established by IFRS.

IFRS specialties

IFRS establish generic standards, applicable in all areas and for all companies. However, it has also developed special IFRS:

  • IFRS for Small and Medium Enterprises (SMEs): They are similar to general IFRS, but more simplified. They are exempted, for example, from the obligation to present certain financial statements.
  • IFRS for the Public Sector: IFRS have been established for public accounting, with all the specialties that this entails.

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