International Financial Reporting Standards: Gateway to Foreign Investment

International Financial Reporting Standards (IFRS) is a set of accounting standards developed and maintained by the International Accounting Standards Board (IASB); these accounting standards or frameworks are accepted by India. 

In 2011, the Institute of Chartered Accountants of India released a concept paper on the strategy of adoption of IFRS in India. This move was encouraged by the Ministry of Corporate Affairs. The primary objective of this development is to make India’s businesses investment-ready, as IFRS is believed to be more transparent than US GAAP. 

If you are seeking investment from overseas investors then you must read this blog on IFRS’s challenges, opportunities and its comparison with other accounting standards. 

What is IFRS? 

International Financial Reporting Standards (IFRS) is a set of accounting standards laid down by the International Accounting Standards Board (IASB), headquartered in London, UK. The main purpose of developing these standards is to bring consistency and transparency in accounting and financial reporting across the organization of the whole world. 

The Government of India and the Ministry of Corporate Affairs are actively encouraging organizations to adopt IFRS so that they can seek investments from international investors. With the adoption of IFRS, it becomes easy for an investor to compare financial reports of your organization with others, enabling them to make informed decisions regarding the investment. 

Features of IFRS

International Accounting Standards Board (IASB) has developed International Financial Reporting Standards (IFRS) to standardize the accounting and reporting process of organizations across the globe. The following are the features of the same: 

Global Applicability:

IFRS is being adopted worldwide, enabling consistency and comparability in financial reporting, across the globe, irrespective of the industry type. 

Principle-Based Approach: 

IFRS is based primarily on principles instead of rules, offering a robust framework for interpretation. Due to this feature, you can get flexibility in application, which allows you to incorporate different business practices. 

Fair Value Emphasis:

IFRS stresses the importance of fair value measurement, encouraging organizations to report the fair value of financial instruments, assets and liabilities. 

Comprehensive Income:

IFRS contains a statement of comprehensive income, including all income and expenses recorded in the given period. 

Unified Conceptual Framework:

IFRS offers a conceptual framework that may function as a foundation for the development of accounting standards. 

Consolidation Principles:

IFRS provides direction on the consolidation of financial statements where control is a determining factor. 

Interim Financial Reporting:

IFRS shares guidance on interim financial reports, enabling timely and relevant information in the reports. 

Financial Statement Presentation:

IFRS provides the format and content of financial statements for the statement of financial position, statement of changes in equity, cash flow and comprehensive statement. 

Use of Fair Value for Biological Assets:

Under IFRS, it is permissible to use the fair value accounting accounting for biological assets, e.g. livestock and agricultural produce. 

Disclosures:

IFRS emphasizes providing sufficient information in disclosures for investors to the financial performance of your organization. 

Joint Ventures:

IFRS premises proportional consolidation or the equity method on the level of control in JVs. 

Earnings Per Share (EPS):

A consistent method for the calculation and presentation of earnings per share is prescribed in IFRS. 

Impairment of Assets:

IFRS mandates entities to assess the impairment of assets, e.g. goodwill, based on the recoverable amount. 

First-Time Adoption:

There is a separate standard i.e IFRS 1 for the organization transitioning other accounting frameworks to IFRS for the first time. 

Revenue recognition:

Under IFRS, comprehensive standards are laid out on revenue recognition, offering principles for recognizing revenue from dealings with customers.

 List of International Financial Reporting Standards

Standard Name	Title	Year of issuing	Effective from
IFRS 1	First-time Adoption of International Financial Reporting Standards	2003	January 1, 2004
IFRS 2	Share-based Payment	2004	January 1, 2005
IFRS 3	Business Combinations	2004	April 1, 2004
IFRS 4	Insurance Contracts	2004	January 1, 2005
IFRS 5	Non-current Assets Held for Sale and Discontinued Operations	2004	January 1, 2005
IFRS 6	Exploration for and Evaluation of Mineral Resources	2004	January 1, 2006
IFRS 7	Financial Instruments: Disclosures	2005	January 1, 2007
IFRS 8	Operating Segments	2006	January 1, 2009
IFRS 9	Financial Instruments	2009(updated in 2014)	January 1, 2018
IFRS 10	Consolidated Financial Statements	2011	January 1, 2013
IFRS 11	Joint Arrangements	2011	January 1, 2013
IFRS 12	Disclosure of Interests in Other Entities	2011	January 1, 2013
IFRS 13	Fair Value Measurement	2011	January 1, 2013
IFRS 14	Regulatory Deferral Accounts	2014	January 1, 2016
IFRS 15	Revenue from Contracts with Customers	2014	January 1, 2018
IFRS 16	Leases	2016	January 1, 2019
IFRS 17	Insurance contracts	2017	January 1, 2023
IFRS 18	Presentation and Disclosure in Financial Statements	2024	January 1, 2027
IFRS 19	Subsidiaries without Public Accountability: Disclosures	2024	January 1, 2027

Over to You 

We hope that after reading this blog, you will realize the significance of IFRS, especially for MSMEs seeking foreign investments. If you are facing any trouble creating or managing financial reports, do not hesitate to sign up for Munim Accounting and Billing software. It provides 35+ financial reports created with real-time data. What are you waiting for? Sign up now! 

Frequently Asked Questions on IFRS

How many IFRS standards are there​?

In total there are 19 standards and 26 interpretations which are adopted by more than 140 countries including India, Australia, Japan and European Union. 

What is IFRS 9​?

IFRS 9 is a part of the International Financial Reporting Standards (IFRS) that sets standards for the classification and measurement of financial assets and liabilities. This standard came into existence in 2014 by the International Accounting Standards Board (IASB) 

How many countries have adopted IFRS?

IFRS has been adopted by 140 countries, including India. 

What are the objectives of IFRS?

Following are the objectives of IFRS

• Develop high-quality, globally accepted financial reporting standards 
• Provide a common reporting structure for companies 
• Enhance the quality of financial reporting
• Facilitate easy comparison of financial statements among different jurisdictions

Which financial statements are prepared under IFRS?​

Following are the statements which are prepared under IFRS: 

• Statement of Financial Position
• Statement of Comprehensive 
• Statement of Changes in Equity
• Statement of Cash Flow