IFRS advantages and disadvantages, requirement of IFRS

1. Module 3
• International Financial Reporting Standards -
Meaning
• Framework for IFRS
• Importance
• Advantages and disadvantages
• Requirements of the IFRS
• Summary of IFRS

2. International Financial Reporting
Standards (IFRS)
• IFRS are a set of accounting standards developed by the IASB
that is becoming the global standard for the preparation of
public company financial statements.
• IFRS is sometimes confused with International Accounting
Standards (IAS), which are older standards that IFRS has now
replaced. The goal of IFRS is to provide a global framework for
how public companies prepare and disclose their financial
statements.
• They are progressively replacing the many different national
accounting standards. They are the rules to be followed by
accountants to maintain books of accounts which are
comparable, understandable, reliable and relevant as per the
users internal or external.

5. IFRS
• IFRS Foundation - Governed by a board of 22
trustees. IFRS Foundation is the new name of
International Accounting Standards
Committee (IASC), approved in January 2010.
• IFRS Advisory Council - The IFRS Advisory
Council is the formal advisory body to the
IASB and the Trustees of the IFRS Foundation
• IFRS Interpretations Committee -
interpretive body of the IFRS Foundation.

6. Importance of IFRS
• A business can present its financial statements on the same
basis as its foreign competitors, making comparisons easier.
• Companies with subsidiaries in countries that require or
permit IFRS may be able to use one accounting language
company-wide.
• Companies may need to convert to IFRS if they are a
subsidiary of a foreign company that must use IFRS, or if they
have a foreign investor that must use IFRS.
• Capital market regulators must be aware of only one set of
accounting standards and the companies will experience
efficiency in raising capital and reduced information
processing cost.
• The companies will no longer required to prepare its financial
statement under different GAAP and make the task of listing
shares in foreign exchange easier.

7. Advantages of the IFRS
• having one accounting system will make life a little less complicated
for both the companies and the investors.
• knowledge of IFRS is now essential for internationally active,
growing businesses.
• one global set of high-quality accounting standards and that IFRS is
currently best positioned to fulfill that need.
• one reporting standard will make it more efficient for investors to
research and compare financial statements globally and more
effectively.
• higher market liquidity, more investment flows through foreign
mutual funds, and more favourable terms in private debt
contracting, greater analyst coverage, and lower stock return
synchronicity.

8. Disadvantages of the IFRS
• differences in financial reporting, and financial statements would not be
“identical” because of the differences in national laws, economic
conditions, and objectives.
• environmental factors such as culture, language, and legal system affect
how IFRS is applied.
• The differing backgrounds of the people in numerous countries applying
IFRS means that interpretative differences will arise because of different
historical practices.
• If some countries interpret the IFRS differently than other countries, the
financial statements between those countries would not be comparable.
• audit fees of public accounting firms increase after the transition to IFRS.
• costs of application by companies, such as changing the internal systems
to make it compatible with the new reporting standards, training costs and
etc., are increased.
• Substantial amount of time to convert to IFRS completely, depending on
the size of the company.

9. Requirements of the IFRS
• Statement of Financial Position
• Statement of Profit or Loss and Other
Comprehensive Income
• Statement of Changes in Equity (SOCE)
• Cash Flow Statement or Statement of Cash Flows
for the reporting period.
• Notes comprising a summary of significant
accounting policies and other explanatory
information.
• Statement of financial position

10. List of the International Financial Reporting
Standards (IFRSs)
IFRS 1 First-time Adoption of International Financial Reporting
Standards.
IFRS 2 Share-based Payment.
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
IFRS 6 Exploration for and Evaluation of Mineral Resources
IFRS 7 Financial Instruments: Disclosures
IFRS 8 Operating Segments
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interest in Other Entities
IFRS 13 Fair Value Measurement
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue from Contracts with Customers