January 29, 2022

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International Financial Reporting Standards (IFRS) and Other Related Standards. What you should know

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In preparing and presenting multi-purpose financial statements, the International Financial Reporting Standards (IFRS) must be applied in Nigeria and other countries that adopt the standards. In this article let’s define this standard and examine other related standards.

Definition — What does IFRS really means?

It is a worldwide recognized accounting standards applied when preparing and presenting financial reports. It is those accounting policies, conventions, concepts, rules, principles, methods and basis used in preparing financial statements. It is also referred to as Generally Accepted Accounting Principles (GAAP). If a business applies IFRS, it is said that the entity complies with the standard.

Key Explanations

Accounting standards. This is what I refer to as the accounting Bible. It is to an accountant in almost the same manner as the Bible is to humans in general. In Nigeria, before the adoption of IFRS, a local standard was used. It is called Statement of Accounting Standards (SAS). Every country has the right to prepare it’s accounting standards. But the use of international recognized standards make preparation and presentation of reports to be similar among countries. This helps to improve comparability by analysts.

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Financial statements. Multi-purpose financial statements include statement of profit or loss and other comprehensive income, statement of financial position, statement of changes in equity and statement of cash flows.

Accounting policies. The concepts, conventions, methods, basis and rules decided upon by an entity’s management to use in preparing and presenting business reports.

Accounting concepts and conventions. These are what all preparers of financial statements agreed on to guide the preparations and presentations of accounting standards and financial statements.

Accounting principles. Includes all accounting standards prepared by the International Accounting Standards Board (IASB). This is under the umbrella body of IFRS Foundation.

Accounting methods. Those methods apply to certain accounting issues like impairment loss on financial assets, depreciation of Property, Plants and Equipment among others.

Accounting basis. There are two basis of accounting – cash and accrual basis. Cash basis recognized cash as the basis of preparing financial reports. Accrual basis makes use of what the business incurred or earned as the basis for preparing the statements.

Compliance. An entity is said to comply with IFRS if it uses the standard wholly in the recommended statements it prepares. To know if a firm complies with IFRS, external auditors are employed.

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What you should know about IFRS

IFRS Foundation was formed in the year 2000 to take over from IASC Foundation. In doing so, it’s adopted the standards prepared by IASC (International Accounting Standard Committee). These are the Internationally Accounting Standards. There are about 41 Standards, some of which are outdated and replaced with new standards prepared by IASB referred to as IFRS. And seventeen IFRS has already been made available to users.

The board also prepares IFRS for SMEs standard. This includes thirty five sections. Next is the IFRS Interpretations Committee and SMEs Interpretations group. The International Financial Reporting Interpretations Committee (IFRIC) also adopted previous interpretations from the Standing Interpretations Committee (SIC). In addition, it prepared it’s Interpretations which are now 23 in number.

Conclusion

IFRS is a standard setting body. It prepares principles that are used by each entity in Nigeria in preparing accounting reports including all manner of financial statements. More to this, IFRS is prepared by IASB under the umbrella body of IFRS Foundation established in 2000 to take over from IASC Foundation. The board adopted the standards prepared previously by IASC.

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