IFRS (International Financial Reporting Standards)

1. Definition

IFRS (International Financial Reporting Standards) is a set of accounting standards issued by the International Accounting Standards Board (IASB) based in London. It was developed to provide a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. It is currently adopted by over 140 jurisdictions, including the EU, South Korea, Australia, and Canada.

2. Key Features

2.1. Principle-based

Unlike rule-based systems, IFRS sets out broad principles rather than dictating specific treatments. This approach allows for flexibility and relies heavily on the professional judgment of accountants and management to reflect the economic substance of transactions.

2.2. Focus on Consolidation

IFRS mandates that the consolidated financial statements (grouping the parent and subsidiaries as a single economic entity) are the primary source of financial reporting, rather than individual company statements.

2.3. Fair Value Accounting

IFRS places a strong emphasis on Fair Value measurement for assets and liabilities, aiming to reflect the current market conditions rather than historical costs.

3. Impact

The adoption of IFRS has lowered barriers to cross-border investment by increasing transparency and comparability, reducing the cost of capital for companies seeking global funding.