Understanding IFRS Standards: A Comprehensive Guide

IFRS standards are International Financial Reporting Standards (IFRS) that consist of a set of accounting rules that determine how transactions and other accounting events are required to be reported in financial statements. They are designed to maintain credibility and transparency in the financial world, which enables investors and business operators to make informed financial decisions.

IFRS standards are issued and maintained by the International Accounting Standards Board and were created to establish a common language so that financial statements can easily be interpreted from company to company and country to country.

IFRS are the standard in over 100 countries, including the EU and many parts of Asia and South America.  The United States, however, has not yet adopted them and the SEC is still deciding whether or not they should move toward them as the official standard of accounting.

List of IFRS Standards

Below is a list of IFRS standards from http://www.ifrs.org/issued-standards/list-of-standards/

IFRS #IFRS Standard1First-time Adoption of International Financial Reporting Standards2Share-based Payment3Business Combinations4Insurance Contracts5Non-current Assets Held for Sale and Discontinued Operations6Exploration for and Evaluation of Mineral Resources7Financial Instruments: Disclosures8Operating Segments9Financial Instruments10Consolidated Financial Statements11Joint Arrangements12Disclosure of Interests in Other Entities13Fair Value Measurement14Regulatory Deferral Accounts15Revenue from Contracts with Customers16Leases17Insurance Contracts

IFRS vs. US GAAP

The largest difference between the US GAAP (Generally Accepted Accounting Principles) and IFRS is that IFRS is principle-based while GAAP is rule-based. Rule-based frameworks are more rigid and allow less room for interpretation, while a principle-based framework allows for more flexibility.

There are pros and cons to both approaches, depending on how they are used.  For example, using a standard that fits within a “rule” but that clearly does not represent the principle behind the standard can be a downside of the GAAP.  While conversely, taking an overly liberal interpretation of standards is a potential drawback to the IFRS.

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Additional Resources

Thank you for reading the CFI guide to accounting standards. To keep learning and developing your career as a financial analyst, these additional CFI resources will be helpful:

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