International Financial Reporting Standards

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International Financial Reporting Standards (IFRS) are Standards, Interpretations and the Framework (in the absence of a Standard or an Interpretation) adopted by the International Accounting Standards Board (IASB).

“In the absence of a Standard or an Interpretation that specifically applies to a transaction, management must use its judgement in developing and applying an accounting policy that results in information that is relevant and reliable. In making that judgement, IAS 8.11 requires management to consider the definitions, recognition criteria, and measurement concepts for assets, liabilities, income, and expenses in the Framework. This elevation of the importance of the Framework was added in the 2003 revisions to IAS 8." [1] International Accounting Standard IAS 8, Paragraph 11:
“In making the judgement, management shall refer to, and consider the applicability of, the following sources in descending order: (a) the requirements and guidance in Standards and Interpretations dealing with similar and related issues; and (b) the definitions, recognition criteria and measurement concepts for assets, liabilities, income and expenses in the Framework.”[2]

Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). IAS were issued between 1973 and 2001 by the board of the International Accounting Standards Committee (IASC). In April 2001 the IASB adopted all IAS and continued their development, calling the new standards IFRS.


The fire of convergence

"Accounting standards convergence is at a major crossroads that could throw the project off track - unless the US and Europe find the will to work it out"

"...Convergence has become the major goal for the Financial Accounting Standards Board (FASB), the body Herz chairs. By 2011, both the International Accounting Standards Board (IASB) and FASB need to find common ground on each and every accounting standard. The goal is to create a truly global financial language.

Sir David Tweedie, Herz’s opposite number at the London-based IASB, once lectured on the convergence of accounting standards like some grand utopian dream at university.

Now he sits shoulder-to-shoulder with Herz, both men now single-minded in their goal. They have to be.

The inevitable cultural differences, disagreements and rivalries which come with any global enterprise of this scale can easily derail efforts, and almost have. The issue on today’s agenda is by far the most contentious – fair value. The accounting rule was brought into sharp focus during the credit crunch as banks struggled to value their financial assets in illiquid markets.

The rule requires assets to be valued at their market price and as transactions in markets dried up, so too did fair value. Values were in free fall. Herz watched on as the accounting rules he championed, forced banks to value their assets at rock bottom prices.

In due course, the fair value principle itself came under political attack, along with the standard setters who set it.

Fast forward twelve months and the issue is still causing concern. Sitting around the table, the two boards have come to different views on the principle, which seems to illustrate the challenges – both ideological and practical – faced by both as they converge.

Herz’s approach is closer to what some might describe as accounting purity. Fair value should be applied to all assets, including contentious banks’ loan books.

Tweedie, taking into account the views of regulators, allows bank loan books to be valued at amortized cost.

The issue is one of a number of fundamental differences in approach by the two boards, and illustrates the high wire act the IASB and FASB must walk if they really want to achieve convergence.

Herz is not prepared to sacrifice sound accounting principles at the alter of convergence. Tweedie can’t afford to abuse his international mandate to bring Herz on board. The two must work together, as friends, to make convergence a success, but there are some issues this friendship may not be able to overcome..."

U.S. SEC seeks public comment on IFRS transition

The Securities and Exchange Commission (SEC) recently issued Release Nos. 33-9133 and 33-9134 pursuant to its ongoing consideration of whether to implement International Financial Reporting Standards (IFRS) for U.S. issuers in place of U.S. Generally Accepted Accounting Principals (GAAP).

The two notices of solicitation of public comments follow directives in the SEC’s February 24, 2010 Statement of Support of Convergence and Global Accounting Standards, in which it instructed the SEC staff to develop and execute a work plan to identify areas upon which to concentrate fact-gathering efforts to determine whether, when and how to incorporate IFRS.

U.S. SEC to refocus on IFRS roadmap-official

"The U.S. Securities and Exchange Commission will make it a priority in the coming months to refocus on a proposed roadmap to move U.S. companies to international accounting standards, a top agency official said on Thursday.

"Turning back to the roadmap will be an important priority for us this fall," Jim Kroeker, the SEC's new chief accountant said in remarks to a New York State Society of CPAs conference in New York.

Last November, in one of the last major projects of the SEC under former Chairman Christopher Cox, the SEC staff released a a proposed roadmap that would have U.S. companies filing financial results under International Financial Reporting Standards, or IFRS, by 2014, with the option for some companies to adopt the rules earlier.

Kroeker, who took up his post last month, said on Thursday that in the more than 200 comment letters the SEC has received on the proposal, it was "resoundingly clear" that people agree there should be a single set of global high-quality accounting standards, but there were striking differences in how different groups wanted to accomplish that goal.

Kroeker said the SEC staff, as "an important next step," would work on how to put into place various pillars and milestones to reach that goal.

IFRS is written by the London-based International Accounting Standards Board (IASB), while the traditional U.S. accounting rules -- known as U.S. Generally Accepted Accounting Principles (GAAP) -- are written by the Norwalk, Connecticut-based Financial Accounting Standards Board.

Kroeker noted two accounting rule-makers have been working to align both sets of rules over the past few years and recently accelerated certain projects to promote convergence.

But he urged those working to try to align U.S. and international accounting standards to avoid "a race to the bottom," where in a rush to converge the rules, accounting standard setters are urged to adopt the least controversial version of the rules, rather than the one that would best represent economic reality.

"A race to the bottom is an absolute concern I have," Kroeker said. "If we engage in a race to the bottom ultimately there will be no winner in that race."

Source Simplified Reporting: Forgotten in the Crisis?, August 12, 2009

"It's been a year since an SEC advisory committee made suggestions for improving the standard-setting and preparation that goes into financial statements.

August 2008 was a hopeful time for advocates of principles-based accounting. The United States had a new plan to adopt global accounting standards, which are considered to allow for more judgment than U.S. generally accepted accounting principles. And an advisory group to the Securities and Exchange Commission unveiled a 170-page report recommending ways financial reporting could be simplified, including the belief that bright lines should not exist.

A year later, there has been no movement toward adopting International Financial Reporting Standards in the United States since then–SEC chairman Christopher Cox introduced a roadmap for the conversion last August. And while some recommendations of the Committee on Improvements to Financial Reporting were taken up by standard-setters and regulators during the year the CIFR convened, the SEC has procrastinated on addressing the meatier, more-controversial suggestions that could substantially reduce reporting complexity."

SEC Commissioner Elisse B. Walter on Wednesday said she expects the commission to “consider further action” on IFRS adoption early next year.

Walter’s comments at an AICPA conference followed remarks by SEC Chief Accountant James Kroeker on Monday in which he said more information about IFRS adoption would be forthcoming “in the short term.”

The SEC proposed its IFRS convergence road map in August 2008 under former Chairman Christopher Cox. Under the proposal, the SEC would decide in 2011 whether to proceed with rulemaking to require that U.S. issuers use IFRS beginning in 2014. Early adoption beginning with filings in 2010 would be allowed for certain issuers.

But during her Senate confirmation hearings in January, newly appointed Chairman Mary Schapiro expressed reservations about the road map, and the commission subsequently extended the public comment period. Since then, both Kroeker and Schapiro have said the commission would clarify its position on IFRS “this fall.”

“As with any important policy question, we are proceeding deliberately and thoughtfully. We are working diligently to make sure we understand all of the advantages and disadvantages,” Walter said in her speech Wednesday. “At this stage in our review process, I expect we will likely consider further action sometime in early 2010.”

Walter also discussed the ongoing Congressional debate over financial regulation in the wake of the economic crisis, highlighting the importance of maintaining the independence of the standard-setting process for accounting standards.

“Oversight of the independent private-sector standard setter should not become entangled with other regulatory priorities, such as addressing systemic risk,” Walter said. “Instead, accounting standards should remain a means of producing neutral and objective measures of the financial performance of public companies. This is critical if we are to protect the integrity and credibility of accounting standards, which are the backbone of our financial reporting system.”

The full text of Walter’s speech is available here.

U.S. securities regulators are reviewing a proposed roadmap to move U.S. companies to international accounting rules, but are struggling with a lack of public consensus on how to get there, a Securities and Exchange Commission official said on Thursday.

Last November, in one of the Commission's last major projects under former Chairman Christopher Cox, the SEC staff released a suggestions that would have U.S. companies filing financial results under International Financial Reporting Standards, or IFRS, by 2014, with the option for some companies to adopt the rules earlier.

The adoption of international accounting standards by U.S. companies would move the world toward one set of standards, and might make it simpler for investors to compare companies operating in different regions. Proponents also say this would enable companies to raise capital more easily in whatever markets appeal to them.

When the SEC's new chairman, Mary Schapiro, took over early this year, she said she would review the proposals, and SEC officials have promised to provide more clarity before 2010.

But at a New York State Society of CPAs conference in New York on Thursday, Julie Erhardt, deputy chief accountant at the SEC, said that while most of the public agrees with the concept of one single set of high-quality accounting standards, regulators have noted there is very little agreement on anything else.

"The comment letters on how to get there were an array, meaning every possible idea you could think of on how to get there, somebody had in a letter -- there was no unanimity," Erhardt said.

The so-called roadmap proposal was originally open for public comment until mid-February, but the SEC extended that period until late April. The agency received about 220 comment letters on the topic, but that is a small number considering the change is likely to affect all of the 10,000-plus U.S. companies regulated by the SEC.

"In terms of the staff being able to say, 'Well, here's a majority view,' you can't say that," Erhardt said of the comment letters which differed on basic concepts such as how many accounting standard setters to have, and whether the United States should permit any companies to make the switch early.

"It creates more of a blank sheet of paper for the staff working with the commissioners," she said, noting the Commission simply "hasn't decided yet."

Among other issues, several companies said they do not believe the SEC has accurately estimated how much a switch to IFRS would cost, and some wonder whether Congress actually supports the proposal, Erhardt said.

Major economies like Japan, Canada, and South Korea are joining Europe and the more than 100 other countries using IFRS, but the United States, which still operates off Generally Accepted Accounting Principles (GAAP), risks remaining the last major holdout.

Some critics say that if the United States embraces IFRS, it could jeopardize more than a century of progress under U.S. accounting rules, and expose companies to more lawsuits because IFRS has largely been designed by less litigious countries and is viewed as more principle-based than rules-based.

"We're working on what the next steps could and should be, but there isn't a date certain to announce anything," Erhardt said.

SEC approves statement on global accounting standards

The Securities and Exchange Commission today voted to issue a statement that lays out its position regarding global accounting standards and makes clear that the Commission continues to believe that a single set of high-quality globally accepted accounting standards would benefit U.S investors.

As a step toward achieving the goal of a single set of high-quality global accounting standards, the statement notes that the Commission continues to encourage the convergence of U.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) in order to narrow the differences between the two sets of standards.

"For nearly 30 years, the Commission has promoted a single set of high-quality globally accepted accounting standards, which would advance the dual goals of improving financial reporting within the U.S. and reducing country-by-country disparities in financial reporting," said SEC Chairman Mary L. Schapiro. "But supporting this goal is only the beginning of the discussion, not the end."

The Commission also directed its staff to execute a Work Plan, the results of which will aid the Commission in its evaluation of the impact that the use of IFRS by U.S. companies would have on the U.S. securities market. Included in this Work Plan will be consideration of IFRS, as it exists today and after the completion of various "convergence projects" currently underway between U.S. and international accounting standards-setters. By 2011, assuming completion of these convergence projects and the staff's Work Plan, the Commission will decide whether to incorporate IFRS into the U.S. financial reporting system, and if so, when and how.

In November 2008, the Commission proposed a series of milestones (also known as the Proposed Roadmap) that would guide the Commission in determining whether to transition U.S. capital markets to IFRS.

After proposing the Roadmap, the Commission received more than 200 comment letters from a wide variety of market participants, including investors, regulators, issuers, accountants, attorneys, academia, standards setters, and international organizations.

Commenters expressed widespread support for the goal of having a single set of high-quality globally accepted accounting standards, but differed in their views about the approach in the Proposed Roadmap.

Therefore, the Commission's statement indicates that it is important to carefully consider and deliberate whether such a change is in the best interest of U.S. investors and markets.

Among other things, the staff's Work Plan will address many of the issues highlighted by commenters, including:

  • Determining whether IFRS is sufficiently developed and consistent in application for use as the single set of accounting standards in the U.S. reporting system.
  • Ensuring that accounting standards are set by an independent standard-setter and for the benefit of investors.
  • Investor understanding and education regarding IFRS, and how it differs from U.S. GAAP.
  • Understanding whether U.S. laws or regulations, outside of the securities laws, for example tax laws and regulatory reporting, would be affected by a change in accounting standards.
  • Understanding the impact on companies, both large and small, including changes to accounting systems, changes to contractual arrangements, corporate governance considerations and litigation contingencies.
  • Determining whether the people who prepare and audit financial statements are sufficiently prepared, through education and experience, to make the conversion to IFRS.

The SEC staff will provide public progress reports on the Work Plan, as well as the status of the FASB and IASB convergence projects, beginning no later than October 2010 and frequently thereafter until the work is complete.

Commenters on the Proposed Roadmap also expressed a view that U.S. companies would need approximately a four- to five-year timeframe to successfully implement a change in their financial reporting systems to incorporate IFRS. Therefore, if the Commission determines in 2011 to incorporate IFRS into the U.S. financial reporting system, the first time that U.S. companies would report under such a system would be no earlier than 2015. The Work Plan would further evaluate this timeline.

Single standard proves elusive goal

Global adoption

IFRS are used in many parts of the world, including the European Union, Hong Kong, Australia, Malaysia, Pakistan, Cooperation Council for the Arab States of the Gulf, Russia, South Africa, Singapore and Turkey.

As of August 27, 2008, more than 113 countries around the world, including all of Europe, currently require or permit IFRS reporting. Approximately 85 of those countries require IFRS reporting for all domestic, listed companies.[3]

"International Accounting Standards Board chairman Sir David Tweedie said that other countries are running out of patience waiting for the Securities and Exchange Commission to decide on whether to approve a roadmap for transitioning to International Financial Reporting Standards and that the U.S. would need to commit by 2011.

Speaking at the American Accounting Association’s annual meeting, Tweedie described how he and FASB Chairman Bob Herz had worked closely together over the years on converging IFRS with U.S. GAAP, and how the U.S. had been involved from the outset in creating IFRS. However, after the SEC issued its roadmap last October, and there was a change of administration in Washington, SEC Commissioner Mary Schapiro has not yet approved the proposed roadmap.

“This is a very interesting moment for us, a once-in-a-lifetime moment. Where is the USA?” asked Tweedie. “That is a question I am asked all around the world. The convergence program is designed to reduce the cost of transition. FASB is riding two horses: U.S. GAAP and trying to converge at the same time, but so are we. We get a lot of criticism over the favored-nation status toward the United States. The European Federation of Accountancy Bodies has just talked about how the point has been reached where there have been diminishing returns from convergence with U.S. GAAP, particularly as more and more countries, including major economies such as Japan and India, move toward direct adoption of full IFRS, and the IASB should change its strategy and concentrate exclusively on major improvements and simplifications of IFRS for the short term. We think that’s wrong. If you’re going to have global standards, we need the U.S., but it can’t go on indefinitely. We’ve been converging for seven years. We have a timetable to finish in 2011. It’s designed to fit these major economies — Korea, Canada, Japan, India — who are converging that year. We have to finish this year.”

The timetable in the proposed roadmap envisions a vote by the SEC in 2011 on whether or not to go ahead with IFRS adoption, depending on whether certain milestones have been reached, such as funding for the IASB. However, Tweedie said that he has heard concerns about the U.S. not making a commitment by that time.

“What people resent are four American board members, Mary Schapiro, and the five-man monitoring board, five out of 22 trustees, three joint meetings a year,” he said. “They want us to stop it. My view is we must keep going. But to be blunt, if the U.S. turns down IFRS, or doesn’t even put a date certain — it doesn’t matter when it is to be, 2017, who cares, if they don’t commit, I think it will be impossible to continue this after 2011.”

Tweedie acknowledged that there were problems in moving the U.S. to principles-based standards and in going from 17,000 pages of U.S. GAAP in the new FASB Codification to 2,500 in IFRS. He said that firms were worried about lawsuits and joked that lawyers were more plentiful than mice in the U.S. However, he argued that it would be easier to defend professional judgment and principles-based standards in court. “If you ask U.S. litigation attorneys if this sort of system will actually increase litigation, the answer is no,” said Tweedie. “Which would you rather defend? I can defend a principle. Miss something on page 1,793, you’re finished. That’s a big difference.”

Tweedie acknowledged that the U.S. would lose some sovereignty and run into political interference, but he pledged that FASB would continue to be a major player working with the IASB on research projects and giving its views as they worked to develop new standards. “My view is the U.S. needs to commit by 2011 one way or the other, or else it is impossible to hold this together again,” he said. “It would be almost impossible to sign another memorandum of understanding again at that stage.” There are now 117 countries that have signed up to adopt IFRS, and Tweedie expects there to be 150 by 2011. He plans to concentrate on getting more countries in Africa involved in adopting the standards now.

Asked about what kinds of concerns he had heard from Schapiro and other members of the SEC, he responded, “They didn’t really talk so much about their concerns,” he said. “They’re obviously concerned about the U.S. environment here. They clearly want to do what is right for the United States. Is the cost too much at the present moment? It is in the middle of a recession, but then you’re not being asked to change right now. There is the option, or actually requirement, of going back to U.S. GAAP if you don’t do IFRS. I think [the SEC is] watching what happens. They’re taking people’s views very seriously, and they’ll make a reasoned judgment in due course.”"

For a current overview see IAS PLUS's list of all countries that have adopted IFRS.


The Australian Accounting Standards Board (AASB) has issued 'Australian equivalents to IFRS' (A-IFRS), numbering IFRS standards as AASB 1-8 and IAS standards as AASB 101 - 141. Australian equivalents to SIC and IFRIC Interpretations have also been issued, along with a number of 'domestic' standards and interpretations. These pronouncements replaced previous Australian generally accepted accounting principles with effect from annual reporting periods beginning on or after 1 January 2005 (i.e. 30 June 2006 was the first report prepared under IFRS-equivalent standards for June year ends). To this end, Australia, along with Europe and a few other countries, was one of the initial adopters of IFRS for domestic purposes.

The AASB has made certain amendments to the IASB pronouncements in making A-IFRS, however these generally have the effect of eliminating an option under IFRS, introducing additional disclosures or implementing requirements for not-for-profit entities, rather than departing from IFRS for Australian entities. Accordingly, for-profit entities that prepare financial statements in accordance with A-IFRS are able to make an unreserved statement of compliance with IFRS.

The AASB continues to mirror changes made by the IASB as local pronouncements. In addition, over recent years, the AASB has issued so-called 'Amending Standards' to reverse some of the initial changes made to the IFRS text for local terminology differences, to reinstate options and eliminate some Australian-specific disclosure. There are some calls for Australia to simply adopt IFRS without 'Australianising' them and this has resulted in the AASB itself looking at alternative ways of adopting IFRS in Australia.ifrs


The use of IFRS will be required in 2011 for Canadian publicly accountable profit-oriented enterprises. This includes public companies and other “profit-oriented enterprises that are responsible to large or diverse groups of shareholders.”

European Union

All listed EU companies have been required to use IFRS since 2005.

In order to be approved for use in the EU, standards must be endorsed by the Accounting Regulatory Committee (ARC), which includes representatives of member state governments and is advised by a group of accounting experts known as the European Financial Reporting Advisory Group. As a result IFRS as applied in the EU may differ from that used elsewhere.

Parts of the standard IAS 39: Financial Instruments: Recognition and Measurement were not originally approved by the ARC. IAS 39 was subsequently amended, removing the option to record financial liabilities at fair value, and the ARC approved the amended version. The IASB is working with the EU to find an acceptable way to remove a remaining anomaly in respect of hedge accounting.


The government of Russia has been implementing a program to harmonize its national accounting standards with IFRS since 1998.

Since then twenty new accounting standards were issued by the Ministry of Finance of the Russian Federation aiming to align accounting practices with IFRS. Despite these efforts essential differences between national accounting standards and IFRS remain. Since 2004 all commercial banks have been obliged to prepare financial statements in accordance with both national accounting standards and IFRS. Full transition to IFRS is delayed and is expected to take place from 2011.


Turkish Accounting Standards Board translated IFRS into Turkish in 2006. Since 2006 Turkish companies listed in Istanbul Stock Exchange are required to prepare IFRS reports.

Hong Kong

Starting in 2005, Hong Kong Financial Reporting Standards (HKFRS) are identical to International Financial Reporting Standards. While Hong Kong had adopted many of the earlier IAS as Hong Kong standards, some had not been adopted, including IAS 32 and IAS 39. And all of the December 2003 improvements and new and revised IFRS issued in 2004 and 2005 will take effect in Hong Kong beginning in 2005.

Implementing Hong Kong Financial Reporting Standards: The challenge for 2005 (August 2005) sets out a summary of each standard and interpretation, the key changes it makes to accounting in Hong Kong, the most significant implications of its adoption, and related anticipated future developments. There is one Hong Kong standard and several Hong Kong interpretations that do not have counterparts in IFRS. Also there are several minor wording differences between HKFRS and IFRS. [4]


In Singapore the Accounting Standards Committee (ASC) is in charge of standard setting. Singapore closely models its Financial Reporting Standards (FRS) according to the IFRS, with appropriate changes made to suit the Singapore context. Before a standard is enacted, consultations with the IASB are made to ensure consistency of core principles [5]

United States and convergence with US GAAP

In 2002 at a meeting in Norwalk, Connecticut, the IASB and the US Financial Accounting Standards Board (FASB) agreed to harmonize their agenda and work towards reducing differences between IFRS and US GAAP (the Norwalk Agreement). In February 2006 FASB and IASB issued a Memorandum of Understanding including a program of topics on which the two bodies will seek to achieve convergence by 2008.

US companies registered with the United States Securities and Exchange Commission must file financial statements prepared in accordance with US GAAP. Until 2007, foreign private issuers were required to file financial statements prepared either (a) under US GAAP or (b) in accordance with local accounting principles or IFRS with a footnote reconciling from local principles or IFRS to US GAAP. This reconciliation imposed extra expense on companies which are listed on exchanges both in the US and another country. From 2008, foreign private issuers are additionally permitted to file financial statements in accordance with IFRS as issued by the IASB without reconciliation to US GAAP.[6] There is broad expectation among U.S. companies that the SEC will move to allow or require them to use IFRS in the near future and a growing acceptance of that scenario, according to Controllers' Leadership Roundtable survey data.[7]

In August 2008, the SEC announced a timetable that would allow some companies to report under IFRS as soon as 2010 and require it of all companies by 2014.[8]

In January, 2009, the SEC announced that a mandatory two year dual-reporting period would begin for most companies in 2012, with IFRS only required by 2014. [9]


The Institute of Chartered Accountants of India has undertaken a project to update all existing Accounting Standards to be compatible with IFRS. The new standards are expected to be ready by 2011.


"Japan’s Financial Services Authority has decided to permit voluntary domestic use of International Financial Reporting Standards, putting added pressure on the U.S. to follow suit.

After the U.S., Japan has remained the last major economy not to adopt, or commit to adopting, IFRS. The Japanese FSA is establishing an operational framework for the voluntary application of IFRS in Japan, starting with the fiscal year ending on or after March 31, 2010. The changes also end, for fiscal years ending after March 31, 2010, the option for some Japanese-listed companies to submit their consolidated financial statements according to U.S. GAAP.

Japan’s Business Accounting Council, which serves as an advisory group to the FSA commissioner, released a roadmap in June for IFRS adoption. The BAC proposed allowing an early voluntary adoption of IFRS by listed companies in Japan, followed by a decision in 2012 on whether to make adoption mandatory starting in 2015 or 2016.

“The FSA’s decision to permit domestic use of IFRS represents a first step towards a mandatory use of IFRS in Japan, and is an important milestone on the path towards global standards,” said International Accounting Standards Board Chairman Sir David Tweedie in a statement. “The decision is also a recognition of the successful cooperation between the IASB and the Accounting Standards Board of Japan. This decision should provide encouragement to other countries on the path to embracing global standards.”

In the U.S., the Securities and Exchange Commission has not yet voted on approving the roadmap to IFRS that was proposed late last year under outgoing chairman Christopher Cox. That roadmap would have included a vote in 2011 on whether to adopt IFRS starting in 2014. His successor, Mary Schapiro, has been more cautious in her approach to the roadmap, although she has joined in statements by the G20 leaders advocating the goal of a single set of high-quality accounting standards by June 2011.

On Monday, SEC Commissioner Elisse Walter told attendees at an AICPA conference that she expects the SEC to “consider further action [on the roadmap] sometime in early 2010.” In the meantime, the IASB and its U.S. counterpart, the Financial Accounting Standards Board, have accelerated their efforts at converging IFRS and U.S. GAAP. The two boards have resolved to meet on a monthly basis, in person and via video conference, to resolve most of the major outstanding differences by June 2011.

The Accounting Standards Board of Japan (ASBJ) and the International Accounting Standards Board (IASB) have held their tenth meeting to accelerate convergence of Japanese generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRSs). Led by Ikuo Nishikawa, Chairman of the ASBJ, and Sir David Tweedie, Chairman of the IASB, the meeting took place in London on 7 and 8 September 2009.

As part of the meeting, representatives of the IASB provided an update on their ongoing project work, in particular on those projects that form part of the convergence programme between the IASB and the US Financial Accounting Standards Board (FASB) and on the measures that are being undertaken by the IASB in response to the financial crisis.

The Accounting Standards Board of Japan has agreed to resolve all inconsistencies between the current JP-GAAP and IFRS by 2011. [10]

Structure of IFRS

IFRSs are considered "principles based" set of standards in that they establish broad rules as well as dictating specific treatments.

International Financial Reporting Standards comprise:

  • International Financial Reporting Standards (IFRS) - standards issued after 2001
  • International Accounting Standards (IAS) - standards issued before 2001
  • Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC) - issued after 2001
  • Standing Interpretations Committee (SIC) - issued before 2001

There is also a Framework for the Preparation and Presentation of Financial Statements which describes some of the principles underlying IFRS.


The Framework for the Preparation and Presentation of Financial Statements states basic principles for IFRS.

Objective of financial statements

A framework is the foundation of accounting standards. The framework states that the objective of financial statements is to provide information about the financial position, performance and changes in the financial position of an entity that is useful to a wide range of users in making economic decisions, and to provide the current financial status of the entity to its shareholders and public in general.

Underlying assumptions

The underlying assumptions used in IFRS are:

  • Accrual basis - the effect of transactions and other events are recognized when they occur, not as cash is received or paid
  • Going concern - the financial statements are prepared on the basis that an entity will continue in operation for the foreseeable future.

Qualitative characteristics of financial statements

The Framework describes the qualitative characteristics of financial statements as having

  • Understandability
  • Relevance
  • Reliability
  • Comparability
  • Materiality
  • Neutrality
  • Substance over form
  • Faithful representation
  • Prudence.

Elements of financial statements

The Framework sets out the statement of financial position (balance sheet) as comprising:-

  • Assets - resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
  • Liabilities - a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
  • Equity - the residual interest in the assets of the entity after deducting all its liabilities and the statement of comprehensive income (income statement) as comprising:
    • Revenue is increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or reductions in liabilities.
    • Expenses are decreases in such economic benefits.

To see more about IFRS go to the excellent Wikipedia entry.


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