In this article an exposure is given on the basics of International Financial Reporting Standards (IFRS).International Financial Reporting Standards, IASB, IASC, IAS

Muthupandian, K S

English

Research Papers in Economics

An Introduction to 
International 
Financial Reporting 
Standards 
 
 
K.S.Muthupandian* 
 
 
 
The term International Financial Reporting Standards (IFRSs) has both a narrow and a 
broad meaning. Narrowly, IFRSs refers to the new numbered series of pronouncements 
that the International Accounting Standards Board (IASB) is issuing, as distinct from the 
International Accounting Standards (IASs) series issued by its predecessor International 
Accounting Standards Committee (IASC) from 1973 to 2000. More broadly, IFRSs refers 
to  the  entire  body  of  IASB  pronouncements,  including  standards  and  interpretations 
approved by the IASB and IASs and SIC interpretations approved by the predecessor 
IASC.  
 
The IASB was preceded by the IASC which operated until 2001. IASC was founded in 
June  1973  as  a  result  of  an  agreement  by  accountancy  bodies  in  Australia,  Canada, 
France, Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland and 
the United States, and these countries constituted the Board of IASC at that time. The 
international professional activities of the accountancy bodies were organised under the 
International Federation of Accountants (IFAC) in 1977. In 1981, IASC and IFAC agreed 
that IASC would have full and complete autonomy in setting IASs and in publishing 
discussion documents on international accounting issues. At the same time, all members 
of IFAC became members of IASC. This membership link was discontinued in May 2000 
when IASC's Constitution was changed as part of the reorganisation of IASC. 
 
Since 2001, the IASB has amended some IASs and has proposed to amend others, has 
replaced some IASs with new IFRSs, and has adopted or proposed certain new IFRSs on 
topics for which there was no previous IAS. Through committees, both the IASC and the 
IASB  also  have  issued  Interpretations  of Standards.  Financial statements  may not  be 
described as complying with IFRSs unless they comply with all of the requirements of 
each applicable standard and each applicable interpretation.  
________________________________________________________________________ 
*M.Com., AICWA and Member of Tamil Nadu State Treasuries and Accounts 
Service presently working as Treasury Officer, Ramanathapuram. 
  
Objectives of IASB: 
Under the IASCF Constitution, the objectives of the IASB are:  
(a) to develop, in the public interest, a single set of high quality, understandable and 
enforceable global accounting standards that require high quality, transparent and 
comparable information in financial statements and other financial reporting to help 
participants in the world's capital markets and other users make economic decisions;  
(b) to promote the use and rigorous application of those standards; and  
(c) in fulfilling the objectives associated with (a) and (b), to take account of, as 
appropriate, the special needs of small and medium-sized entities and emerging 
economies; and  
(d) to bring about convergence of national accounting standards and IASs and IFRSs to 
high quality solutions.  
Scope of IFRSs 
IASB Standards are known as International Financial Reporting Standards (IFRSs).  
All IASs and Interpretations issued by the former IASC and SIC continue to be 
applicable unless and until they are amended or withdrawn.  
IFRSs apply to the general purpose financial statements and other financial reporting by 
profit-oriented entities -- those engaged in commercial, industrial, financial, and similar 
activities, regardless of their legal form.  
Entities other than profit-oriented business entities may also find IFRSs appropriate.  
General purpose financial statements are intended to meet the common needs of 
shareholders, creditors, employees, and the public at large for information about an 
entity's financial position, performance, and cash flows.  
Other financial reporting includes information provided outside financial statements that 
assists in the interpretation of a complete set of financial statements or improves users' 
ability to make efficient economic decisions.  
IFRS apply to individual company and consolidated financial statements.  
 A complete set of financial statements includes a balance sheet, an income statement, a 
cash flow statement, a statement showing either all changes in equity or changes in equity 
other than those arising from investments by and distributions to owners, a summary of 
accounting policies, and explanatory notes.  
If an IFRS allows both a 'benchmark' and an 'allowed alternative' treatment, financial 
statements may be described as conforming to IFRS whichever treatment is followed.  
In developing Standards, IASB intends not to permit choices in accounting treatment. 
Further, IASB intends to reconsider the choices in existing IASs with a view to reducing 
the number of those choices.  
IFRS will present fundamental principles in bold face type and other guidance in non-
bold type (the 'black-letter'/'grey-letter' distinction). Paragraphs of both types have equal 
authority.  
The provision of IAS 1 that conformity with IAS requires compliance with every 
applicable IAS and Interpretation requires compliance with all IFRSs as well. 
Due Process for IFRS  
Due process steps for a Standard will normally include the following (* means required 
by IASB Constitution):  
Staff work to identify and study the issues  
Study of existing national standards and practices  
IASB consults with SAC about the advisability of adding the project to the IASB's 
agenda*  
IASB normally forms an advisory group*  
IASB publishes a discussion document for comment  
IASB considers comments received on the discussion document  
IASB publishes an exposure draft with at least 8 affirmative votes* (the exposure draft 
will include dissenting opinions and basis for conclusions)  
IASB considers comments received on the exposure draft  
IASB considers the desirability of holding a public hearing and of conducting field tests*  
IASB approves the final Standard with at least 8 affirmative votes* (the Standard will 
include dissenting opinions and basis for conclusions)  IASB deliberates in meetings open to public observation. 
Due Process for Interpretations  
Interpretations of IFRS will be developed by the International Financial Reporting 
Interpretations Committee (IFRIC) for approval by IASB.  
Due process steps for an Interpretation will normally include (* means required by IASB 
Constitution):  
Staff work to identify and study the issues and existing national standards and practices  
IFRIC studies national standards and practices  
IFRIC publishes a draft Interpretation for comment if no more than 3 IFRIC members 
have voted against the proposal*  
IFRIC considers comments received on the draft Interpretation within a reasonable period 
of time  
IFRIC approves the final Interpretation if no more than 3 IFRIC members have voted 
against the proposal and submits it to IASB*  
IASB approves the final Interpretation by at least 8 affirmative votes of IASB*  
IFRIC deliberates in meetings open to public observation  
Currently Effective Standards 
 
So far IASB has issued 8 IFRS (see Table 1) in addition to 41 IASs (Table 2) issued by 
IASC.  
  
Adoption of IFRS in India 
‘We  will  expedite  the  adoption  of  accounting  standards  in  alignment  with  the 
International  Accounting  Standards,’  said  Prime  Minister,  Dr.  Manmohan  Singh.The 
Institute of Chartered Accountants of India (ICAI) has decided to fully converge with 
IFRSs issued by the IASB from the accounting periods commencing on or after 1st April, 
2011.   Like  in  other  countries  such  as  Australia,  New  Zealand  and  countries  in  the 
European Union, the IFRSs will be adopted for the listed entities and other public interest 
entities such as banks, insurance companies and large-sized entities. The decision is an 
important milestone in  achieving full convergence with  IFRSs  as  India will join 102 
countries  which  presently  require  or  permit  use  of  IFRSs  in  preparation  of  financial 
statements in their countries. By 2011, the number is expected to reach 150.  
 Conclusion 
With a view to ensure smooth transition to the IFRSs from April 1, 2011 it is necessary to 
formulate  work-plan and conduct IFRS-specific training programmes to implement 
IFRSs. It is essential to take up those areas in certain IFRSs where some changes in 
IFRSs may be required keeping in view the Indian conditions. 
 
 
Table 1 
International Financial Reporting Standards 
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 Assets  
IFRS 7 Financial Instruments: Disclosures  
IFRS 8 Operating Segments  
 
 
 
Table 2 
 
International Accounting Standards 
IAS 1 Presentation of Financial Statements  
IAS 2 Inventories  
IAS 3 Consolidated Financial Statements  
Originally issued 1976, effective 1 Jan 1977. Superseded in 1989 by IAS 27 and 
IAS 28. 
IAS 4 Depreciation Accounting  
Withdrawn in 1999, replaced by IAS 16, 22, and 38, all of which were issued or 
revised in 1998. IAS 5 Information to Be Disclosed in Financial Statements  
Originally issued October 1976, effective 1 January 1997. Superseded by IAS 1 
in 1997. 
IAS 6 Accounting Responses to Changing Prices 
Superseded by IAS 15, which was withdrawn December 2003 
IAS 7 Cash Flow Statements  
IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors  
IAS 9 Accounting for Research and Development Activities  
Superseded by IAS 38 effective 1.7.99 
IAS 10 Events After the Balance Sheet Date  
IAS 11 Construction Contracts  
IAS 12 Income Taxes  
IAS 13 Presentation of Current Assets and Current Liabilities  
Superseded by IAS 1. 
IAS 14 Segment Reporting  
IAS 15 Information Reflecting the Effects of Changing Prices  
Withdrawn December 2003 
IAS 16 Property, Plant and Equipment  
IAS 17 Leases  
IAS 18 Revenue  
IAS 19 Employee Benefits  
IAS 20 Accounting for Government Grants and Disclosure of Government 
Assistance  
IAS 21 The Effects of Changes in Foreign Exchange Rates  
IAS 22 Business Combinations  
Superseded by IFRS 3 effective 31 March 2004. 
IAS 23 Borrowing Costs IAS 24 Related Party Disclosures  
IAS 25 Accounting for Investments  
Superseded by IAS 39 and IAS 40 effective 2001. 
IAS 26 Accounting and Reporting by Retirement Benefit Plans  
IAS 27 Consolidated and Separate Financial Statements  
IAS 28 Investments in Associates  
IAS 29 Financial Reporting in Hyperinflationary Economies  
IAS 30 Disclosures in the Financial Statements of Banks and Similar 
Financial Institutions  
Superseded by IFRS 7 effective 2007. 
IAS 31 Interests In Joint Ventures 
IAS 32 Financial Instruments: Presentation  
Disclosure provisions superseded by IFRS 7 effective 2007. 
IAS 33 Earnings Per Share  
IAS 34 Interim Financial Reporting  
IAS 35 Discontinuing Operations  
Superseded by IFRS 5 effective 2005. 
IAS 36 Impairment of Assets  
IAS 37 Provisions, Contingent Liabilities and Contingent Assets  
IAS 38 Intangible Assets  
IAS 39 Financial Instruments: Recognition and Measurement  
IAS 40 Investment Property  
IAS 41 Agriculture  
 
 
 
 
 
 

An Introduction to International Financial Reporting Standards

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