IFRS - what is it? IFRS: reporting, standards

According to official data, in 2015 it will be mandatory to introduce such regulations as international financial reporting standards for special categories. Most often you can find an abbreviation of this concept - IFRS.

These categories will include:

• professional stock market participants;
• commodity exchanges;
• non-state pension funds;
• clearing companies;
• joint-stock investment funds;
• managing organizations of the above categories.

It makes sense to start with the question: “IFRS - what is it?”. This concept is deciphered as a set of specialized documents, or rather standards, through which the regulation of the procedure for creating financial statements, which is freely available for external users, is carried out.

IFRS versus Russian accounting system

First of all, there is a difference in the end users with information, which includes the relevant accounting indicators, grouped according to the above standards. In particular, the Russian model was aimed at government and statistics, while the international model was aimed at investors, enterprises and financial institutions. As a result of this, in the differences associated with it regarding the interests and needs for financial information, various principles also appear, on which the procedure for generating these statements is based.

So, an obligatory rule in IFRS is the priority of the content with regards to the presentation of the previously specified information. Speaking about the Russian accounting system, the moment is most often omitted.

A practical example is the situation in which PBU considers preferred shares to be part of the capital of an enterprise, although there are very few distinguishing features from bonds regarding their economic nature. In accordance with IFRS, these features are significant in order not to reflect them in equity.

The purpose of implementing IFRS on Russian enterprises

In order to formulate financial statements appropriately perceived and understandable by users of various countries, international standards have been introduced. Their goal is to unify the compilation of the considered set of documents and provide data on the activities of any company.

It is worth highlighting the list of documents that determine the financial statements. IFRS aimed at their unification regarding the creation order, namely:

• balance sheet;
• cash flow statement ;
• report about incomes and material losses;
• report on changes in capital or other operations of this orientation;
• accounting policy.

Along with the above reports, enterprises can also generate certain reviews for the management team, which show the profit figures of this company.

IFRS - what is it?

This accounting system looks like a specific set of documents, including the following elements:

• introduction to the provisions of the standards in question;
• clarification of the fundamental principles of preparation and presentation of this type of reporting, in essence the concept of IFRS;
• standards and related interpretations of these documents.

Each of the above documents has its own significance, but it is used exclusively in combination with other elements. Thus, from the list indicated above, it means that IFRS are standards, each of which has a definitely established structure.

The semantic aspect of the standards of the accounting system

They establish the rules that determine the decoding procedure for individual transactions performed during the implementation of the core business of the enterprise and reflected in the financial statements.

It is important to note that the standards adopted by the relevant body until 2001 are referred to as the International Accounting Standards or IAS for short, and further, since 2001, the International Financial Reporting Standards, the abbreviation of which has this spelling - IFRS.

Valid Above Standards

Key IFRSs developed before 2001 include:

1. “Presentation of financial statements” (IAS No. 1).
2. “Reserves” (IAS No. 2).
3. “Cash Flow Statements” (IAS No. 7).
4. “Accounting policies, changes in accounting estimates and errors” (IAS No. 8).
5. “Events after the reporting date” (IAS No. 10).
   
6. Construction Contracts (IAS No. 11).
7. 7. “Income taxes” (IAS No. 12).
8. 8. “Segment reporting” (IAS No. 14).
9. 9. “Fixed assets” (IAS No. 16).
10. Lease (IAS No. 17).
11. “Revenue” (AS No. 18).
12. Employee Benefits (IAS No. 19).
13. “Accounting for government subsidies and disclosure of government assistance” (IAS No. 20).
14. “The Effect of Changes in Foreign Exchange Rates” (IAS No. 21).
15. “Borrowing costs” (IAS No. 23).
16. “Disclosure of Information” (IAS No. 24).
17. “Accounting and reporting on pension programs (pension plans)” (IAS No. 26).
18. “Consolidated and Separate Financial Statements” (IAS No. 27).
19. “Investments in Associates” (IAS No. 28).
20. “Financial Reporting in Hyperinflationary Economies” (IAS No. 29).
21. “Disclosure of information in the financial statements of banks and similar financial organizations” (IAS No. 30).
22. “Participation in joint activities” (IAS No. 31).
23. “Financial Instruments - Disclosure and Presentation” (IAS No. 32).
24. Earnings per Share (IAS No. 33).
25. Interim Financial Reporting (IAS No. 34).
26. Impairment of Assets (IAS No. 36).
27. “Provisions, contingent liabilities and contingent assets” (IAS No. 37).
28. Intangible Assets (IAS No. 37).
29. “Financial Instruments - Recognition and Measurement” (IAS No. 39).
30. “Investment Property” (IAS No. 40).
31. "Agriculture" (IAS No. 41).

International financial reporting standards

The list of standards of the accounting system under consideration adopted since 2001 has the following form:

1. “Adopting International Financial Reporting Standards for the first time” (IFRS No. 1).
2. “Payments based on equity instruments” (IFRS No. 2).
3. Business Combinations (IFRS No. 3).
4. “Insurance Contracts" (IFRS No. 4).
5. “Non-current assets held for sale and discontinued operations” (IFRS No. 5).
6. “Exploration and Evaluation of Mineral Resources” (IFRS No. 6).

What marked the current year regarding the accounting system under consideration?

From official sources, it became known that the last volume of IFRS 2014, called the Red Book, was ready. It contains rules on international accounting, including those that will enter into force after January 1 of the current year. An example is the amendments to the ninth standard, called “Financial Instruments”, adopted since 2001. There are also two sets of annual changes regarding IFRS 2011-2013 and IFRS 2010-2012, one interpretation of fees, the constitution of the IFRS Foundation, a detailed work plan.

What is good in this accounting system?

In order to generate a financial report that is correct by international standards, IFRS will be indispensable in helping.

It is worth highlighting a number of advantages of this accounting system, which can be associated with the activities of the following entities:

1. Financial analysts, investors, as this is due to understandability, transparency, reliability and lower costs.
2. Companies, because the costs of measures to attract investment are reduced, there is a unified accounting system, there is no need to coordinate financial information, the procedure in both internal and external accounting.
3. Auditors: in view of the fact that there is uniformity in the fundamental principles of accounting, there is an opportunity to participate in the adoption of relevant standards, large-scale trainings are held.
4. The developers of these standards themselves - due to the fact that this is a great opportunity to exchange experiences, the basis for future national standards and the convergence of existing ones.

All of the above helps once again get the answer to the question: “IFRS - what is it?”

How to smooth the transition to IFRS?

The tasks of reform include the following:

1. Special training of accountants to the level of professional knowledge of the fundamentals of the accounting system under consideration.
2. Strengthening in the minds of enterprise managers a real interest in providing truthful and objective information.
3. The final distinction between accounting tax, financial and management.

The importance of the transition is determined by the fact that IFRS are standards that are a compromise between the main world accounting systems.

The appeal of accounting reform for businesses around the world

The IFRS financial statements under review can facilitate the entry of world-class capital markets for companies from different countries, as well as increase the comparability of information and make it more transparent to external users.

Specifically, Russian enterprises will be able to speak the same language with their foreign colleagues and strengthen their business positions in foreign markets in terms of equal opportunities, as a result of which numerous prospects for international capital markets will become available.

The introduction of IFRS will have a positive effect on the quality of management accounting, in particular on its improvement, and will also contribute to updating information systems and staff motivation.

In addition, attracting foreign capital without reporting compiled in accordance with IFRS is currently very difficult. It doesn’t matter if this is done either with the help of Western banks, or by entering the stock market located abroad, or by attracting private investment from abroad. Reporting compiled in accordance with PBU, a potential foreign investor, most likely, will not understand. Therefore, it is worth taking care of the formation of the reporting regulated by IFRS.

Companies are aware of the fact that in the not too distant future international standards will become national ones. For many firms, IFRS reports are already required today to provide a significant competitive advantage by attracting resources in international borrowing markets such as bonds, loans or IPOs.

Thus, all of the above helps to understand in more detail the question: "IFRS - what is it?"