International Financial Reporting Standards, IFRS
IFRS (International Financial Reporting Standards) is a set of documents (standards and interpretations) governing the preparation of financial statements necessary for external users to make economic decisions about an enterprise.
In 1973, public accounting and auditing organizations in several countries created an international professional non-governmental organization – the International Accounting Standards Committee (IASC). The main goal of the committee was to improve financial reporting at the international level.
This committee developed the standards from 1973 to 2001; they came out under the name of International Accounting Standards (IAS). As part of the reorganization in April 2001, the IASC was replaced by the IASB (International Accounting Standards Board). Since 2001, the IASB has been releasing newly created standards under the name of International Financial Reporting Standards (IFRS). The members of the IASB are responsible for the development and publication of IFRS as well as for the approval of their interpretations.
The purpose of applying financial reporting standards is to reduce differences in the forms of providing financial statements, improve the quality and comparability of information, and unify standards. Uniform standards make it possible to more effectively evaluate and compare the performance of various companies, including international ones.
In contrast to some national reporting rules, IFRS are standards based on principles rather than strictly written rules. This is done so that in any practical situation, compilers of reports could follow the spirit of principles, and not try to find loopholes in clearly defined rules that would allow bypassing any basic provisions.
The company's financial statements, compiled in accordance with international standards, give the company several advantages:
- Improve business management – provide high quality and timely information for making management decisions, simplify the management of large structures, etc.
- Allow developing business – to find new partners, to participate in tenders, to enter international markets, etc.
- Increase investment attractiveness – make the company more "transparent", and, therefore, more attractive to investors and shareholders.
- Allow receiving financing on more favorable terms – to take credits from banks at lower interest rates, to receive alternative financing, etc.
- Increase business value.
In the IT Enterprise system, the advantages described above can be obtained by using the product "Accounting compliant to international financial reporting standards (IFRS)".