Introduction of IFRS

First of all, we know what is IFRS. IFRS's full form is International Financial Reporting Standards. It is the set of some of rules and regulation.In this world, any knowledge or any work, there is some rules if you want to get same knowledge or do same work. I often give a simple example about your health. If you want to become healthy in whole healthy life, you need to get up early in the morning, you need to sleep early in the night. You need to eat healthy food. You have to keep your attitude happy and positive in all the situations. With these simple rules, you can live a healthy life. If you will not follow, you can face different chronic diseases. So, everything, you will learn the rules. In accounting, there are some rules. In India, we explain it in Indian accounting standards. In USA, we know these rules as International accounting standards as per their country's business need. All rules are made for scientific and logical presentation of financial statements. On these statements, Govt. can calculate the tax and also investors can invest the money in same type of business. If these rules will not be in existence and followed, financial statement will not tell truth and invested may be cheated by accounting professionals easily. Investors trusts because it is under standards.

IFRS is also set of accounting rules. 

1. Conversion of International Accounting Standards (IAS)  into International Financial Reporting Standards (IFRS) 

In 2001, International accounting standard board converted his old international accounting standard into new IFRS and requested to all country's CAs board to follow it because it will help to bring unique results of business and encourage more investors of other country to invest in your country's business. Other words, it will grow the business because if there is same language, people can talk more and do more business. So, if accounting is same with same rules, it will easily to use by all for their mutual benefits. For example, an USA citizen is interested in Indian company, so, he will check the assets and liabilities of same Indian company, if it is following IFRS, it means, its report will same as it is USA company. So, same person can take better decision to invest in same Indian company with same set of rules.

2. IFRIC 

It is interpretation committee of international financial reporting standard. Its duty is to explain each concept of these set of rules.

 3. Assumptions of IFRS

Following are the list of assumptions of IFRS

a) Accrual assumption : As per this, all transaction will be recorded on accrual basis not on the basis when cash will receive.
b) Going concern assumption : as per this, business is working unlimited time.
c) Measuring unit assumption : Every stock must have the unit for measuring its accurate quantity and also its value.

d) Constant purchasing power assumption

We will adjust inflation in the cost of each items of financial statement at the end of year.

4. IFRS Based Statement 

1. Statement of Financial Position

In this statement, we show the assets, liabilities and equity capital. Assets are the resources and inflow in resources. Liabilities are outflow of resources and difference between assets and liabilities will be equity capital.

2. Income Statement 

This statement is allowed under IFRS. In this statement, we compare our incomes will expenses. Result may net income or net loss.

3. Statement of Changing in Equity

It is must under IFRS. This statement shows the difference between initial capital and capital at end.

4. Statement of Cash Flow

It is must under IFRS. We have already explained it, you can read it at here.

5. Notes of Accounting Policies

Every business has its own accounting policies. It has freedom to use FIFO or LIFO for inventory calculation as the trend of prices in the market but it has to mention this policy detail at the end of financial statement in the form of notes of accounting policies.