IFRS - what is it? Application and reporting methods

One of the most popular questions that users have with financial documents is: how are IFRS statements maintained? Particularly interested in the answer to it are professional participants in commodity and stock markets, private pension funds, clearing enterprises, joint-stock investment funds and management companies.

General information

Financial documentation is maintained according to different rules. IFRS Standards - International Standards. They govern the preparation of documents that are in the public domain. IFRS and RAS are primarily distinguished by the circle of end users. Domestic rules are focused on government statistics and management. IFRS are the rules established for the preparation of documentation used by investors, financial institutions and enterprises.

History of creation

In 1973, to improve the use of financial documentation, public audit and accounting associations formed non-governmental international organization IFRS Committee. Since 1981, it has been completely autonomous in the implementation of the rules and in the discussion of norms. In 2005, the European Commission decided that all firms whose shares are listed on European exchanges should prepare consolidated financial statements. IFRS is aimed at reducing differences and choosing a method for providing documentation, improving the quality and comparability of information, standardizing rules.

Development procedure

It includes several stages:

1. The advisory group analyzes the problem, evaluates the application of the fundamental principles of reporting, presents the issue at the meeting.
2. A study of national requirements and experience is carried out, an exchange of views takes place with the domestic structures responsible for the development of the rules.
3. Consultations are being held with the Board and the trustees of the fund on the inclusion of the issue on the agenda.
4. A working group is being created to inform the Council.
5. A “Discussion Paper” and a draft standard for discussion are published.
6. The “Basis for a decision”, the opinions of members of the Council having objections are published.
7. Comments received on time are considered.
8. Public hearings are held, testing the applicability of the standard.

The standard is approved by at least 9 votes. After that, the norm is published together with the grounds for a decision.

Specificity

The mandatory rule of IFRS is the priority of content over the form of information provided. If we talk about the domestic model, then this principle is often omitted. In practice, this is manifested as follows. In the framework of the PBU preference shares considered as part of the capital of the enterprise. However, if we talk about their economic nature, there are very few differences from bonds. This fact is taken into account in IFRS. This means that international standards consider the similarity of preferred shares with bonds as a sufficient reason not to include them in the capital of the company.

Implementation objectives

The key objective of IFRS is the unification of the process of generating financial documentation and providing information about the activities of the enterprise. You can select a list of securities that are subject to international standards. These documents include:

1. Balance sheet.
2. Reports on losses and profits, cash flow, changes in equity and other similar operations.
3. Financial policy.

In addition to these acts, enterprises may also create reviews for management. They reflect key performance indicators of the enterprise, profit margins, and so on.

Composition

International standards are presented in the form of a set of documents. They include:

1. Foreword to the provisions.
2. Explanations regarding the fundamental principles of preparation and forms of reporting.
3. Standards and interpretations.

Each document has its own special meaning. However, in practice, all the elements included in the IFRS system are applied. The funds provided by international standards make it possible to decipher individual operations performed within the framework of the core business of the company and reflected in the financial documentation.

Key elements

It should be noted that international standards created before 2001 were called International Accounting Standards. Since 2001, some new rules have been approved - the International Financial Reporting Standards. The following major IASs apply today:

1. "Stocks".
2. "Presentation of financial documentation."
3. "Accounting policies, adjustments in accounting estimates, errors."
4. "Events after the end date of the reporting period."
5. "Construction Contracts".
6. "Income taxes."
7. "Segment reporting."
8. "OS".
9. "Rent".
10. "Revenue".
11. "Salary to employees."
12. "Accounting for state subsidies, disclosure of information on state aid."
13. "The effect of changes in foreign exchange rates."
14. "Borrowing costs."
15. "Disclosure of Information."
16. "Financial documentation for pension social security programs."
17. "Separate and consolidated reporting."
18. "Investments in associates."
19. Financial documentation in hyperinflationary conditions. "
20. "Disclosure of information in documents of banks and other similar organizations."
21. "Participation in general activities."
22. "Financial instruments - provision, disclosure."
23. Earnings per share.
24. "Interim financial documentation."
25. "Impairment of assets."
26. Contingent and estimated liabilities, contingent assets. "
27. "NMA".
28. "Procedure for the recognition and measurement of financial instruments."
29. "Investment real estate".
30. "Agriculture".
    

IFRS

Since 2001, the following international standards have been in force:

1. "Rules for the adoption of International Standards for the first time."
2. "The procedure for payments based on equity financial instruments."
3. "Business combination".
4. "Insurance Contracts".
5. "Non-current assets reserved for sale, discontinued operations."
6. "Exploration, evaluation of mineral resources."
   

Benefits

Accounting under IFRS has many advantages. First of all, international rules allow you to generate financial documentation that is understandable for different categories of external users. Compliance with IFRS is beneficial:

1. For financial analysts and investors. The documentation is clear, transparent, and the information in it is reliable and reliable.
2. Companies. The IFRS report allows you to reduce the cost of measures to raise capital, eliminates the need to coordinate information. In addition, a uniform procedure is established in both external and internal documentation.
3. Auditors. Since uniformity is established in the principles of accounting, specialists can participate in deciding on the adoption of standards.
4. Developers. As part of the standard-setting activities, there is a massive exchange of experience. The basis for future national regulations is being developed, existing rules are being adjusted.

The specifics of the transition to the international system

The introduction of IFRS standards at domestic enterprises is accompanied by a number of organizational and technical problems. Company managers need to conduct special training for their financial professionals. Accountants must be proficient in the basics of IFRS. Moreover, the leaders themselves should be really interested in providing objective and truthful information. As part of the financial activities of the enterprise, it is necessary to clearly distinguish between tax and accounting.The importance of switching to international rules is due to the fact that they act as a compromise between key documentation systems around the world.

Tasks of reforming the domestic model

The implementation of reporting in accordance with international rules solves many pressing problems. Reforming the current system is aimed at:

1. To facilitate access to global capital markets for enterprises in different countries.
2. Strengthening the comparability of information, increasing the transparency of information for external users.

Russian companies using the IFRS report in their activities will be able to understand the goals and objectives of foreign partners. Due to closer interaction with foreign enterprises, domestic firms will strengthen their positions in the markets and become more competitive. This, in turn, will realize the potential of companies at international sites. As practice shows, the use of the IFRS system has a positive effect on the state of management accounting. The implementation of international rules ensures a high-quality update of information, increases staff motivation. It is worth noting that today, attracting foreign investment without the formation of financial documentation in accordance with IFRS is very difficult. At the same time, it does not matter which source the enterprise is contacting: a foreign bank, stock market customers, or private individuals. The documentation compiled according to the rules of the PBU, external users do not understand well. It is more expedient to formalize it in accordance with international standards adopted throughout the world and successfully used by many companies.

Application in different states

International regulations act as binding in several European countries. In most countries, IFRS financial documentation is prepared by entities whose shares are publicly listed. The United States uses its own US GAAP rules. In 2008, in August, the Exchange and Securities Commission submitted a preliminary draft transition to IFRS. In 2011, the process was suspended. The work was resumed again in 2014. In Russia, measures to reform accounting were launched in 1998. Since 2005, all banking and credit organizations are required to generate financial documents in accordance with international rules.

In July 2010, Federal Law No. 208 was introduced. According to its provisions, the IFRS system is mandatory for the consolidated reporting of socially significant enterprises. In addition to credit companies, these include insurance companies, as well as other organizations whose securities are admitted to trading on stock exchanges.

In 2011, the Regulation on the recognition of international rules and clarifications to them on the territory of the Russian Federation was approved. At the same time, financial departments did not plan to completely abandon the domestic documentation system. IFRS was intended to be introduced for consolidated financial statements. It was planned to extend federal norms to documents drawn up by legal entities. Currently, more than 140 enterprises in Russia form and publish reports in accordance with international rules.