The history of IFRS stems from the need to create a common accounting language after the post-World War II economic boom and the rise of multinational corporations.
What is IFRS? #
IFRS (International Financial Reporting Standards) known as International Financial Reporting Standards including accounting standards issued by International Accounting Standards Council (International Accounting Standards Board - IASB) with the goal of setting general rules for possible financial reporting unified, transparent , and comparable all around the world. Creating a global accounting language makes financial statements no longer distinguishable between countries and territories, becoming transparent, unified, reliable for analysis and reference.
IFRS defines how companies maintain and report their accounts, identifying other types of transactions and events that have a financial impact. The International Financial Reporting Standards (IFRS) were established to create a common accounting language, so that businesses and their financial statements can be consistent and reliable from company to company. another, country to country.
History of the formation of IFRS through each period #
With the explosion of the global economy after World War II and the growth of multinational corporations, there was a need for a universal accounting language. This led to the creation of the International Accounting Standards Committee (IASC), a consortium of nine original member countries including Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, and the United Kingdom. Great Britain/Northern Ireland and the United States.
IASC is the recognition of the International Organization of Securities Commissions (IOSCO) in 2000 when it made recommendations to member stock exchanges to allow or require listed companies to comply with 10 Standards. Basic International Accounting (IAS) at the time. This led to IAS becoming one of the mandatory requirements for listing on the world's major stock exchanges.
In 1997, the IASC realized that in order to continue to perform its role effectively, it had to find ways to bring about the merging of national accounting standards and practices with global accounting standards. As a result, on April 01, 04, the new International Accounting Standards Board (IASB) was born to replace the old IASC. In its first meeting, the IASB adopted the old International Accounting Standards (IAS) issued by the IASC and the Guidelines from the Accounting Standards Interpretation Committee (SIC). The IASB has since continued to develop new Standards and named them International Financial Reporting Standards (IFRS).
Following the recognition by IOSCO in 2000, another important step in the history of IFRS was the mandatory adoption of IFRS in Europe by Directive EC 1606, all members of the European Union and other member states. Members of the European Economic Area (EEA) are required to apply IFRS on the financial statements of listed companies beginning with the accounting period ended December 31, 12.
Currently, IFRS has grown worldwide and according to the data published by the IASB, there are now 131/143 countries and territories (accounting for 93% of the countries surveyed by the IASB) have declared about this allowing the application of IFRS in different forms. In many countries, IFRS has replaced all National Accounting Standards to facilitate the attraction of global investors.
How is IFRS different from IAS? #
Many readers at first learning about IFRS are also confused with the concept of IAS (International Accounting Standards) and do not understand what it is related to IFRS. As described in the History of IFRS, the IAS is a System of Standards previously issued by the IASC. After the IASC changed its operating structure and was replaced by the IASB, the Standards developed by the IASB were later named IFRS (International Financial Reporting Standards).
However, the old IAS Standards issued by the IASC are all received and published by the IASB until it is changed by later IFRSs (eg IAS 18 is superseded by IFRS 15..) , in addition to the new IFRS Standards there will still be valid old IASs.
Broadly understood, IFRS will include:
- The Conceptual Framework includes the most basic principles for Financial Reporting to be compliant with IFRS. The framework itself is not a stand-alone Standard but it is used as the basis for the development of Standards.
- International Accounting Standards (IAS) previously issued by IASC (before 2001) are still valid.
- International Financial Reporting Standards (IFRS) are issued by the IASB.
- Additional Guidelines for IAS Standards (SIC Interpretation) were issued by the Standards Interpretation Committee (SIC) prior to 2001.
- Additional Guidelines for IFRS Standards (IFRIC Interpretation) are issued by the IFRS Standards Interpretation Committee (IFRIC).
In a nutshell, IFRS is understood as accounting standards in the preparation of financial statements that are commonly used by many countries around the world to remove barriers to differences in previous accounting standards, supporting transparency. , reliable for businesses. The birth of IFRS has an important role in building a common "language" of financial statements and is of great significance in the current integration period.
