International Financial Reporting Standards

(IFRS)
From Wikipedia, the free encyclopedia

International Financial Reporting Standards (IFRS) are principles-based

standards, interpretations and the framework (1989)[1] adopted by the International
Accounting Standards Board (IASB).
Many of the standards forming part of IFRS are known by the older name
of International Accounting Standards (IAS). IAS were issued between 1973
and 2001 by the Board of the International Accounting Standards
Committee (IASC). On April 1, 2001, the new IASB took over from the IASC the
responsibility for setting International Accounting Standards. During its first
meeting the new Board adopted existing IAS and Standing Interpretations
Committee standards (SICs). The IASB has continued to develop standards calling
the new standards IFRS.

Structure of IFRS
Please visit [4] to be referred to the correct structure.

Framework
The Framework for the Preparation and Presentation of Financial Statements states
basic principles for IFRS. (The framework provided in this link is a version issued
by Australia, and is partly out-of-date.)
The IASB and FASB Frameworks are in the process of being updated and
converged. The Joint Conceptual Framework project aims to update and refine the
existing concepts to reflect the changes in markets, business practices and the
economic environment that have occurred in the two or more decades since the
concepts were first developed.
 Accountancy

Key concepts

Accountant · Accounting period · Accrual ·Bookkeeping · Cash

and accrual basis ·Cash flow forecasting · Chart of
accounts ·Convergence · Journal · Special journals ·Constant
item purchasing power accounting ·Cost of goods sold · Credit
terms ·Debits and credits · Double-entry system ·Mark-to-
market accounting · FIFO and LIFO ·GAAP / IFRS · General
ledger · Goodwill ·Historical cost · Matching
principle ·Revenue recognition · Trial balance

Fields of accounting

Cost · Financial · Forensic · Fund · Management ·Tax (U.S.)

Financial statements

Balance Sheet · Cash flow statement ·Income

statement ·Statement of retained earnings · Notes ·Management
discussion and analysis · XBRL

Auditing

Auditor's report · Control self-assessment ·Financial

audit · GAAS / ISA · Internal audit ·Sarbanes–Oxley Act

Accounting qualifications

CIA · CA · CPA · CCA · CGA · CMA · CAT · CIIA ·IIA · CTP

Role of framework
Deloitte states:
In the absence of a Standard or an Interpretation that specifically applies to a
transaction, management must use its judgement in developing and applying an
accounting policy that results in information that is relevant and reliable. In
making that judgement, IAS 8.11 requires management to consider the definitions,
recognition criteria, and measurement concepts for assets, liabilities, income, and
expenses in the Framework. This elevation of the importance of the Framework
was added in the 2003 revisions to IAS 8.[2]

Objective of financial statements

A financial statement should reflect true and fair view of the business affairs of the
organization. As these statements are used by various constituents of the society /
regulators, they need to reflect true view of the financial position of the
organization. and it is very helpful to check the financial position of the business
for a specific period.
IFRS authorize three basic accounting models:
I. Current Cost Accounting, under Physical Capital Maintenance at all levels of
inflation and deflation under the Historical Cost paradigm as well as the Capital
Maintenance in Units of Constant Purchasing Power paradigm. (See the
Conceptual Framework, Par. 4.59 (b).)
II. Financial capital maintenance in nominal monetary units, i.e., globally
implemented Historical cost accounting during low inflation and deflation only
under the traditional Historical Cost paradigm.(See the original Framework (1989),
Par 104 (a))[now Conceptual Framework (2010), Par. 4.59 (a)].
III. Financial capital maintenance in units of constant purchasing power,
i.e., Constant Item Purchasing Power Accounting[5]– CIPPA – in terms of a Daily
Consumer Price Index or daily rate at all levels of inflation and deflation (see the
original Framework (1989), Par 104 (a)) [now Conceptual Framework (2010), Par.
4.59 (a)] under the Capital Maintenance in Units of Constant Purchasing Power
paradigm and Constant Purchasing Power Accounting – CPPA – (see IAS 29)
during hyperinflation under the Historical Cost paradigm.
The following are the three underlying assumptions in IFRS:
 1. Going concern: an entity will continue for the foreseeable future under the
Historical Cost paradigm as well as under the Capital Maintenance in Units of
Constant Purchasing Power paradigm. (See Conceptual Framework, Par. 4.1)
 2. Stable measuring unit assumption: financial capital maintenance
in nominal monetary units or traditional Historical cost accounting only under
the traditional Historical Cost paradigm; i.e., accountants consider changes in
the purchasing power of the functional currency up to but excluding 26% per
annum for three years in a row (which would be 100% cumulative inflation
over three years or hyperinflation as defined in IAS 29) as immaterial or not
sufficiently important for them to choose Capital Maintenance inunits of
constant purchasing power in terms of a Daily Consumer Price Index or daily
rate Constant Item Purchasing Power Accounting at all levels of inflation and
deflation as authorized in IFRS in the original Framework(1989), Par 104 (a)
[now Conceptual Framework (2010), Par. 4.59 (a)].
Accountants implementing the stable measuring unit assumption (traditional
Historical Cost Accounting) during annual inflation of 25% for 3 years in a row
would erode 100% of the real value of all constant real value non-monetary
items not maintained constant under the Historical Cost paradigm.

 3. Units of constant purchasing power: capital maintenance in units of

constant purchasing power at all levels of inflation and deflation in terms of a
Daily Consumer Price Index or daily rate (Constant Item Purchasing Power
Accounting) only under the Capital Maintenance in Units of Constant
Purchasing Power paradigm; i.e. the total rejection of the stable measuring unit
assumption at all levels of inflation and deflation. See The Framework (1989),
Paragraph 104 (a) [now Conceptual Framework (2010), Par. 4.59 (a)]. Capital
maintenance in units of constant purchasing power under Constant Item
Purchasing Power Accounting in terms of a Daily Consumer Price Index or
daily rate of all constant real value non-monetary items in all entities that at
least break even in real value at all levels of inflation and deflation - ceteris
paribus - remedies for an indefinite period of time the erosion caused by
Historical Cost Accounting of the real values of constant real value non-
monetary items never maintained constant as a result of the implementation of
the stable measuring unit assumption at all levels of inflation and deflation
under HCA.
It is not inflation doing the eroding. Inflation and deflation have no effect on the
real value of non-monetary items.[3] It is the implementation of the stable
measuring unit assumption, i.e., traditional HCA which erodes the real value of
constant real value non-monetary items never maintained constant in a double
entry basic accounting model.
Constant real value non-monetary items are non-monetary items with constant real
values over time whose values within an entity are not generally determined in a
market on a daily basis.
Examples include borrowing costs, comprehensive income, interest paid, interest
received, bank charges, royalties, fees, short term employee benefits, pensions,
salaries, wages, rentals, all other income statement items, issued share capital,
share premium accounts, share discount accounts, retained earnings, retained
losses, capital reserves, revaluation surpluses, all accounted profits and losses, all
other items in shareholders´ equity, trade debtors, trade creditors, dividends
payable, dividends receivable, deferred tax assets, deferred tax liabilities, all taxes
payable, all taxes receivable, all other non-monetary payables, all other non-
monetary receivables, provisions, etc.
All constant real value non-monetary items are always and everywhere measured
in units of constant purchasing power at all levels of inflation and deflation under
CIPPA in terms of a Daily CPI or daily rate under the Capital Maintenance in
Units of Constant Purchasing Power paradigm. The constant item gain or loss is
calculated when current period constant items are not measured in units of constant
purchasing power.
Monetary items are units of money held and items with an underlying monetary
nature which are substitutes for units of money held.
Examples of units of money held are bank notes and coins of the fiat currency
created within an economy by means of fractional reserve banking. Examples of
items with an underlying monetary nature which are substitutes of money held
include the capital amount of: bank loans, bank savings, credit card loans, car
loans, home loans, student loans, consumer loans, commercial and government
bonds, Treasury Bills, all capital and money market investments, notes payable,
notes receivable, etc. when these items are not in the form of money held.
Historic and current period monetary items are required to be inflation-adjusted on
a daily basis in terms of a daily index or rate under the Capital Maintenance in
Units of Constant Purchasing Power paradigm. The net monetary loss or gain as
defined in IAS 29 is required to be calculated and accounted when they are not
inflation-adjusted on a daily basis during the current financial period. Inflation-
adjusting the total money supply (excluding bank notes and coins of the fiat
functional currency created by means of fractional reserve banking within an
economy) in terms of a daily index or rate under complete co-ordination would
result in zero cost of inflation (not zero inflation) in only the entire money supply
(as qualified) in an economy.
Variable real value non-monetary items are non-monetary items with variable real
values over time. Examples include quoted and unquoted shares, property, plant,
equipment, inventory, intellectual property, goodwill, foreign exchange, finished
goods, raw material, etc.
Current period variable real value non-monetary items are required to be measured
on a daily basis in terms of IFRS excluding the stable measuring unit assumption
and the cost model in the valuation of property, plant, equipment and investment
property after recognition under the Capital Maintenance in Units of Constant
Purchasing Power paradigm. When they are not valued on a daily basis, then they
as well as historic variable real value non-monetary items are required to be
updated daily in terms of a daily rate as indicated above. Current period
impairment losses in variable real value non-monetary items are required to be
treated in terms of IFRS. They are constant real value non-monetary items once
they are accounted. All accounted losses and profits are constant real value non-
monetary items.
Under the Capital Maintenance in Units of Constant Purchasing Power paradigm
daily measurement is required of all items in terms of
(a) a Daily Consumer Price Index or monetized daily indexed unit of account, e.g.
the Unidad de Fomento in Chile, during low inflation, high inflation and deflation
and
(b) in terms of a relatively stable foreign currency parallel rate (normally the US
Dollar daily parallel rate) or a Brazilian-style Unidade Real de Valor daily index
during hyperinflation. Hyperinflation is defined in IAS 29 as cumulative inflation
being equal to or approaching 100 per cent over three years, i.e. 26 per cent annual
inflation for three years in a row.
Qualitative characteristics of financial statements
Qualitative characteristics of financial statements include:

 Relevance (Materiality)
 Faithful representation
Enhancing qualitative characteristics include:

 Comparability
 Verifiability
 Timeliness
 Understandability

Elements of financial statements (IAS 1 article 10)

 The financial position of an enterprise is primarily provided in the Statement

of Financial Position. The elements include:
 Asset: An asset is a resource controlled by the enterprise as a result of past
events from which future economic benefits are expected to flow to the
enterprise.
 Liability: A liability is a present obligation of the enterprise arising from
the past events, the settlement of which is expected to result in an outflow
from the enterprise' resources, i.e., assets.
 Equity: Equity is the residual interest in the assets of the enterprise after
deducting all the liabilities under the Historical Cost Accounting model.
Equity is also known as owner's equity. Under the units of constant
purchasing power model equity is the constant real value of shareholders´
equity.
 The financial performance of an enterprise is primarily provided in
the Statement of Comprehensive Income (income statement or profit and loss
account). The elements of an income statement or the elements that measure the
financial performance are as follows:
 Revenues: increases in economic benefit during an accounting period in the
form of inflows or enhancements of assets, or decrease of liabilities that
result in increases in equity. However, it does not include the contributions
made by the equity participants, i.e., proprietor, partners and shareholders.
 Expenses: decreases in economic benefits during an accounting period in
the form of outflows, or depletions of assets or incurrences of liabilities that
result in decreases in equity.
Revenues and expenses are measured in nominal monetary units under
the Historical Cost Accounting model and in units of constant purchasing
power (inflation-adjusted) under the Units of Constant Purchasing
Power model.

 Statement of Changes in Equity

 Statement of Cash Flows
 Notes to the Financial Statements

Recognition of elements of financial statements

An item is recognized in the financial statements when:

 it is probable future economic benefit will flow to or from an entity.

 the resource can be reliably measured – otherwise the stable measuring unit
assumption is applied under the Historical Cost Accounting model: i.e. it is
assumed that the monetary unit of account (the functional currency) is
perfectly stable (zero inflation or deflation); it is simply assumed that there
is no inflation or deflation ever, and items are stated at their original
nominal Historical Cost from any prior date: 1 month, 1 year, 10 or 100 or
200 or more years before; i.e. the stable measuring unit assumption is
applied to items such as issued share capital, retained earnings, capital
reserves, all other items in shareholders´ equity, all items in the Statement of
Comprehensive Income (except salaries, wages, rentals, etc., which are
inflation-adjusted annually), etc.
Under the Units of Constant Purchasing Power model, all constant real value
non-monetary items are inflation-adjusted during low inflation and deflation;
i.e. all items in the Statement of Comprehensive Income, all items in
shareholders´ equity, Accounts Receivables, Accounts Payables, all non-
monetary payables, all non-monetary receivables, provisions, etc.

Measurement of the elements of financial statements

Par. 99. Measurement is the process of determining the monetary amounts at
which the elements of the financial statements are to be recognized and carried
in the balance sheet and income statement. This involves the selection of the
particular basis of measurement.
Par. 100. A number of different measurement bases are employed to different
degrees and in varying combinations in financial statements. They include the
following:
(a) Historical cost. Assets are recorded at the amount of cash or cash
equivalents paid or the fair value of the consideration given to acquire them at
the time of their acquisition. Liabilities are recorded at the amount of proceeds
received in exchange for the obligation, or in some circumstances (for example,
income taxes), at the amounts of cash or cash equivalents expected to be paid to
satisfy the liability in the normal course of business.
(b) Current cost. Assets are carried at the amount of cash or cash equivalents
that would have to be paid if the same or an equivalent asset was acquired
currently. Liabilities are carried at the undiscounted amount of cash or cash
equivalents that would be required to settle the obligation currently.
(c) Realisable (settlement) value. Assets are carried at the amount of cash or
cash equivalents that could currently be obtained by selling the asset in an
orderly disposal. Assets are carried at the present discounted value of the future
net cash inflows that the item is expected to generate in the normal course of
business. Liabilities are carried at the present discounted value of the future net
cash outflows that are expected to be required to settle the liabilities in the
normal course of business.
Par. 101. The measurement basis most commonly adopted by entities in
preparing their financial statements is historical cost. This is usually combined
with other measurement bases. For example, inventories are usually carried at
the lower of cost and net realisable value, marketable securities may be carried
at market value and pension liabilities are carried at their present value.
Furthermore, some entities use the current cost basis as a response to the
inability of the historical cost accounting model to deal with the effects of
changing prices of non-monetary assets.
Concepts of capital and capital maintenance
A major difference between US GAAP and IFRS is the fact that three
fundamentally different concepts of capital and capital maintenance are
authorized in IFRS while US GAAP only authorize two capital and capital
maintenance concepts during low inflation and deflation: (1) physical capital
maintenance and (2) financial capital maintenance in nominal monetary units
(traditional Historical Cost Accounting) as stated in Par 45 to 48 in the FASB
Conceptual Satement Nº 5. US GAAP does not recognize the third concept of
capital and capital maintenance during low inflation and deflation, namely,
financial capital maintenance in units of constant purchasing power as
authorized in IFRS in the Framework, Par 104 (a) in 1989.

Concepts of capital
Par. 102. A financial concept of capital is adopted by most entities in preparing
their financial statements. Under a financial concept of capital, such as invested
money or invested purchasing power, capital is synonymous with the net assets
or equity of the entity. Under a physical concept of capital, such as operating
capability, capital is regarded as the productive capacity of the entity based on,
for example, units of output per day.
Par. 103. The selection of the appropriate concept of capital by an entity should
be based on the needs of the users of its financial statements. Thus, a financial
concept of capital should be adopted if the users of financial statements are
primarily concerned with the maintenance of nominal invested capital or the
purchasing power of invested capital. If, however, the main concern of users is
with the operating capability of the entity, a physical concept of capital should
be used. The concept chosen indicates the goal to be attained in determining
profit, even though there may be some measurement difficulties in making the
concept operational.

Concepts of capital maintenance and the determination of profit

Par. 104. The concepts of capital in paragraph 102 give rise to the following
two concepts of capital maintenance:
(a) Financial capital maintenance. Under this concept a profit is earned only if
the financial (or money) amount of the net assets at the end of the period
exceeds the financial (or money) amount of net assets at the beginning of the
period, after excluding any distributions to, and contributions from, owners
during the period. Financial capital maintenance can be measured in
either nominal monetary unitsor units of constant purchasing power.
(b) Physical capital maintenance. Under this concept a profit is earned only if
the physical productive capacity (or operating capability) of the entity (or the
resources or funds needed to achieve that capacity) at the end of the period
exceeds the physical productive capacity at the beginning of the period, after
excluding any distributions to, and contributions from, owners during the
period.
The concepts of capital in paragraph 102 give rise to the following three
concepts of capital during low inflation and deflation:

 (A) Physical capital. See paragraph 102&103

 (B) Nominal financial capital. See paragraph 104.[4]
 (C) Constant purchasing power financial capital. See paragraph 104.[5]
The concepts of capital in paragraph 102 give rise to the following three
concepts of capital maintenance during low inflation and deflation:

 (1) Physical capital maintenance: optional during low inflation and

deflation. Current Cost Accounting model prescribed by IFRS. See Par 106.
 (2) Financial capital maintenance in nominal monetary units (Historical
cost accounting): authorized by IFRS but not prescribed—optional during
low inflation and deflation. See Par 104 (a) Historical cost accounting.
Financial capital maintenance innominal monetary units per se during
inflation and deflation is a fallacy: it is impossible to maintain the real value
of financial capital constant with measurement in nominal monetary units
per se during inflation and deflation.
 (3) Financial capital maintenance in units of constant purchasing
power (Constant Item Purchasing Power Accounting): authorized by IFRS
but not prescribed—optional during low inflation and deflation. See Par
104(a). IAS 29 is prescribed [6] during hyperinflation: i.e. the restatement of
Historical Cost or Current Cost period-end financial statements in terms of
 the period-end monthly published Consumer Price Index.[7] Only financial
capital maintenance in units of constant purchasing power (CIPPA) per se
can automatically maintain the real value of financial capital constant at all
levels of inflation and deflation in all entities that at least break even in real
value—ceteris paribus—for an indefinite period of time. This would happen
whether these entities own revaluable fixed assets or not and without the
requirement of more capital or additional retained profits to simply maintain
the existing constant real value of existing shareholders´ equity constant.
Financial capital maintenance in units of constant purchasing power requires
the calculation and accounting of net monetary losses and gains from
holding monetary items during low inflation and deflation. The calculation
and accounting of net monetary losses and gains during low inflation and
deflation have thus been authorized in IFRS since 1989.
Par. 105. The concept of capital maintenance is concerned with how an entity
defines the capital that it seeks to maintain. It provides the linkage between the
concepts of capital and the concepts of profit because it provides the point of
reference by which profit is measured; it is a prerequisite for distinguishing
between an entity’s return on capital and its return of capital; only inflows of
assets in excess of amounts needed to maintain capital may be regarded as
profit and therefore as a return on capital. Hence, profit is the residual amount
that remains after expenses (including capital maintenance adjustments, where
appropriate) have been deducted from income. If expenses exceed income the
residual amount is a loss.
Par. 106. The physical capital maintenance concept requires the adoption of the
current cost basis of measurement. The financial capital maintenance concept,
however, does not require the use of a particular basis of measurement.
Selection of the basis under this concept is dependent on the type of financial
capital that the entity is seeking to maintain.
Par. 107. The principal difference between the two concepts of capital
maintenance is the treatment of the effects of changes in the prices of assets and
liabilities of the entity. In general terms, an entity has maintained its capital if it
has as much capital at the end of the period as it had at the beginning of the
period. Any amount over and above that required to maintain the capital at the
beginning of the period is profit.
Par. 108. Under the concept of financial capital maintenance where capital is
defined in terms of nominal monetary units, profit represents the increase in
nominal money capital over the period. Thus, increases in the prices of assets
held over the period, conventionally referred to as holding gains, are,
conceptually, profits. They may not be recognised as such, however, until the
assets are disposed of in an exchange transaction. When the concept of
financial capital maintenance is defined in terms of constant purchasing power
units, profit represents the increase in invested purchasing power over the
period. Thus, only that part of the increase in the prices of assets that exceeds
the increase in the general level of prices is regarded as profit. The rest of the
increase is treated as a capital maintenance adjustment and, hence, as part of
equity.
Par. 109. Under the concept of physical capital maintenance when capital is
defined in terms of the physical productive capacity, profit represents the
increase in that capital over the period. All price changes affecting the assets
and liabilities of the entity are viewed as changes in the measurement of the
physical productive capacity of the entity; hence, they are treated as capital
maintenance adjustments that are part of equity and not as profit.
Par. 110. The selection of the measurement bases and concept of capital
maintenance will determine the accounting model used in the preparation of the
financial statements. Different accounting models exhibit different degrees of
relevance and reliability and, as in other areas, management must seek a
balance between relevance and reliability. This Framework is applicable to a
range of accounting models and provides guidance on preparing and presenting
the financial statements constructed under the chosen model. At the present
time, it is not the intention of the Board of IASC to prescribe a particular model
other than in exceptional circumstances, such as for those entities reporting in
the currency of a hyperinflationary economy. This intention will, however, be
reviewed in the light of world developments.[8]

Requirements of IFRS
See Requirements of IFRS. IFRS financial statements consist of (IAS1.8)

 a Statement of Financial Position

 a Statement of Comprehensive Income separate statements comprising
an Income Statement and separately a Statement of Comprehensive Income,
which reconciles Profit or Loss on the Income statement to
total comprehensive income
 a Statement of Changes in Equity (SOCE)
 a Cash Flow Statement or Statement of Cash Flows
 notes, including a summary of the significant accounting policies
Comparative information is required for the prior reporting period (IAS 1.36).
An entity preparing IFRS accounts for the first time must apply IFRS in full for
the current and comparative period although there are transitional exemptions
(IFRS1.7).
On 6 September 2007, the IASB issued a revised IAS 1 Presentation of
Financial Statements. The main changes from the previous version are to
require that an entity must:

 present all non-owner changes in equity (that is, 'comprehensive income'

) either in one Statement of comprehensive income or in two statements (a
separate income statement and a statement of comprehensive income).
Components of comprehensive income may not be presented in the
Statement of changes in equity.
 present a statement of financial position (balance sheet) as at the beginning
of the earliest comparative period in a complete set of financial statements
when the entity applies the new standard.
 present a statement of cash flow.
 make necessary disclosure by the way of a note.
The revised IAS 1 is effective for annual periods beginning on or after 1
January 2009. Early adoption is permitted.

IASB current projects

.[9] Much of its work is LEAD TO convergence with US GAAP.
Adoption of IFRS
IFRS are used in many parts of the world, including the European Union, India,
Hong Kong, Australia, Malaysia, Pakistan, GCC countries, Russia, South
Africa, Singapore and Turkey. As of August 2008, more than 113 countries
around the world, including all of Europe, currently require or permit IFRS
reporting and 85 require IFRS reporting for all domestic, listed companies,
according to theU.S. Securities and Exchange Commission.[10]
It is generally expected that IFRS adoption worldwide will be beneficial to
investors and other users of financial statements, by reducing the costs of
comparing alternative investments and increasing the quality of
information.[11] Companies are also expected to benefit, as investors will be
more willing to provide financing.[11] Companies that have high levels of
international activities are among the group that would benefit from a switch to
IFRS. Companies that are involved in foreign activities and investing benefit
from the switch due to the increased comparability of a set accounting
standard.[12] However, Ray J. Ball has expressed some skepticism of the overall
cost of the international standard; he argues that the enforcement of the
standards could be lax, and the regional differences in accounting could become
obscured behind a label. He also expressed concerns about the fair value
emphasis of IFRS and the influence of accountants from non-common-
law regions, where losses have been recognized in a less timely manner.[11]
For a current overview see PwC's map of countries that apply IFRS.

Australia
The Australian Accounting Standards Board (AASB) has issued 'Australian
equivalents to IFRS' (A-IFRS), numbering IFRS standards as AASB 1–8 and
IAS standards as AASB 101–141. Australian equivalents to SIC and IFRIC
Interpretations have also been issued, along with a number of 'domestic'
standards and interpretations. These pronouncements replaced previous
Australian generally accepted accounting principles with effect from annual
reporting periods beginning on or after 1 January 2005 (i.e. 30 June 2006 was
the first report prepared under IFRS-equivalent standards for June year ends).
To this end, Australia, along with Europe and a few other countries, was one of
the initial adopters of IFRS for domestic purposes (in the developed world). It
must be acknowledged, however, that IFRS and primarily IAS have been part
and parcel of accounting standard package in the developing world for many
years since the relevant accounting bodies were more open to adoption of
international standards for many reasons including that of capability.
The AASB has made certain amendments to the IASB pronouncements in
making A-IFRS, however these generally have the effect of eliminating an
option under IFRS, introducing additional disclosures or implementing
requirements for not-for-profit entities, rather than departing from IFRS for
Australian entities. Accordingly, for-profit entities that prepare financial
statements in accordance with A-IFRS are able to make an unreserved
statement of compliance with IFRS.
The AASB continues to mirror changes made by the IASB as local
pronouncements. In addition, over recent years, the AASB has issued so-called
'Amending Standards' to reverse some of the initial changes made to the IFRS
text for local terminology differences, to reinstate options and eliminate some
Australian-specific disclosure. There are some calls for Australia to simply
adopt IFRS without 'Australianising' them and this has resulted in the AASB
itself looking at alternative ways of adopting IFRS in Australia

Canada
The use of IFRS became a requirement for Canadian publicly accountable
profit-oriented enterprises for financial periods beginning on or after 1 January
2011. This includes public companies and other “profit-oriented enterprises that
are responsible to large or diverse groups of shareholders.”[13]

European Union
All listed EU companies have been required to use IFRS since 2005.
In order to be approved for use in the EU, standards must be endorsed by the
Accounting Regulatory Committee (ARC), which includes representatives of
member state governments and is advised by a group of accounting experts
known as the European Financial Reporting Advisory Group. As a result IFRS
as applied in the EU may differ from that used elsewhere.
Parts of the standard IAS 39: Financial Instruments: Recognition and
Measurement were not originally approved by the ARC. IAS 39 was
subsequently amended, removing the option to record financial liabilities at fair
value, and the ARC approved the amended version. The IASB is working with
the EU to find an acceptable way to remove a remaining anomaly in respect
of hedge accounting. The World Bank Centre for Financial Reporting
Reform is working with countries in the ECA region to facilitate the adoption
of IFRS and IFRS for SMEs.

India
The Institute of Chartered Accountants of India (ICAI) has announced that
IFRS will be mandatory in India for financial statements for the periods
beginning on or after 1 April 2012. This will be done by revising existing
accounting standards to make them compatible with IFRS.
Reserve Bank of India has stated that financial statements of banks need to be
IFRS-compliant for periods beginning on or after 1 April 2011.
The ICAI has also stated that IFRS will be applied to companies above INR
1000 crore (INR 10 billion) from April 2011. Phase wise applicability details
for different companies in India:
Phase 1: Opening balance sheet as at 1 April 2011*
i. Companies which are part of NSE Index – Nifty 50
ii. Companies which are part of BSE Sensex – BSE 30
a. Companies whose shares or other securities are listed on a stock exchange
outside India
b. Companies, whether listed or not, having net worth of more than INR 1000
crore (INR 10 billion)
Phase 2: Opening balance sheet as at 1 April 2012*
Companies not covered in phase 1 and having net worth exceeding INR 500
crore (INR 5 billion)
Phase 3: Opening balance sheet as at 1 April 2014*
Listed companies not covered in the earlier phases * If the financial year of a
company commences at a date other than 1 April, then it shall prepare its
opening balance sheet at the commencement of immediately following
financial year.
On January 22, 2010, the Ministry of Corporate Affairs issued the road map for
transition to IFRS. It is clear that India has deferred transition to IFRS by a
year. In the first phase, companies included in Nifty 50 or BSE Sensex, and
companies whose securities are listed on stock exchanges outside India and all
other companies having net worth of INR 1000 crore will prepare and present
financial statements using Indian Accounting Standards converged with IFRS.
According to the press note issued by the government, those companies will
convert their first balance sheet as at April 1, 2011, applying accounting
standards convergent with IFRS if the accounting year ends on March 31. This
implies that the transition date will be April 1, 2011. According to the earlier
plan, the transition date was fixed at April 1, 2010.
The press note does not clarify whether the full set of financial statements for
the year 2011–12 will be prepared by applying accounting standards convergent
with IFRS. The deferment of the transition may make companies happy, but it
will undermine India’s position. Presumably, lack of preparedness of Indian
companies has led to the decision to defer the adoption of IFRS for a year. This
is unfortunate that India, which boasts for its IT and accounting skills, could not
prepare itself for the transition to IFRS over last four years. But that might be
the ground reality. Transition in phases Companies, whether listed or not,
having net worth of more than INR 500 crore will convert their opening
balance sheet as at April 1, 2013. Listed companies having net worth of INR
500 crore or less will convert their opening balance sheet as at April 1, 2014.
Un-listed companies having net worth of Rs 500 crore or less will continue to
apply existing accounting standards, which might be modified from time to
time. Transition to IFRS in phases is a smart move. The transition cost for
smaller companies will be much lower because large companies will bear the
initial cost of learning and smaller companies will not be required to reinvent
the wheel. However, this will happen only if a significant number of large
companies engage Indian accounting firms to provide them support in their
transition to IFRS. If, most large companies, which will comply with Indian
accounting standards convergent with IFRS in the first phase, choose one of the
international firms, Indian accounting firms and smaller companies will not
benefit from the learning in the first phase of the transition to IFRS. It is likely
that international firms will protect their learning to retain their competitive
advantage. Therefore, it is for the benefit of the country that each company
makes judicious choice of the accounting firm as its partner without limiting its
choice to international accounting firms. Public sector companies should take
the lead and the Institute of Chartered Accountants of India (ICAI) should
develop a clear strategy to diffuse the learning. Size of companies The
government has decided to measure the size of companies in terms of net
worth. This is not the ideal unit to measure the size of a company. Net worth in
the balance sheet is determined by accounting principles and methods.
Therefore, it does not include the value of intangible assets. Moreover, as most
assets and liabilities are measured at historical cost, the net worth does not
reflect the current value of those assets and liabilities. Market capitalisation is a
better measure of the size of a company. But it is difficult to estimate market
capitalisation or fundamental value of unlisted companies. This might be the
reason that the government has decided to use ‘net worth’ to measure size of
companies. Some companies, which are large in terms of fundamental value or
which intend to attract foreign capital, might prefer to use Indian accounting
standards convergent with IFRS earlier than required under the road map
presented by the government. The government should provide that choice.

Japan
The minister for Financial Services in Japan announced in late June 2011 that
mandatory application of the IFRS should not take place from fiscal year-
ending March 2015; five to seven years should be required for preparation if
mandatory application is decided; and to permit the use of U.S. GAAP beyond
the fiscal year ending March 31, 2016.[14]
Montenegro
Montenegro gained independence from Serbia in 2006. Its accounting standard
setter is the Institute of Accountants and Auditors of Montenegro
(IAAM).[15]:2 In 2005, IAAM adopted a revised version of the 2002 “Law on
Accounting and Auditing” which authorized the use of IFRS for all
entities.[15]:18 IFRS is currently required for all consolidated and standalone
financial statements, however, enforcement is not effective except in the
banking sector.[15]:18 Financial statements for banks in Montenegro are,
generally, of high quality and can be compared to those of the European
Union.[15]:3 Foreign companies listed on Montenegro’s two stock exchanges
(Montenegro Stock Exchange and NEX Stock Exchange) are also required to
apply IFRS in their financial statements.[16] Montenegro does not have a
national GAAP.[15]:18 Currently, no Montenegrin translation of IFRS exists, and
because of this Montenegro applies theSerbian translation from
2010.[17]:20 IFRS for SMEs is not currently applied in Montenegro.[17]:20

Pakistan
All listed companies must follow all issued IAS/IFRS except the following:
IAS 39 and IAS 40: Implementation of these standards has been held in
abeyance by State Bank of Pakistan for Banks and DFIs
IFRS-1: Effective for the annual periods beginning on or after January 1, 2004.
This IFRS is being considered for adoption for all companies other than banks
and DFIs.
IFRS-9: Under consideration of the relevant Committee of the Institute (ICAP).
This IFRS will be effective for the annual periods beginning on or after 1
January 2013.

Russia
The government of Russia has been implementing a program to harmonize
its national accounting standards with IFRS since 1998. Since then twenty new
accounting standards were issued by the Ministry of Finance of the Russian
Federation aiming to align accounting practices with IFRS. Despite these
efforts essential differences between Russian accounting standards and IFRS
remain. Since 2004 all commercial banks have been obliged to prepare
financial statements in accordance with both Russian accounting standards and
IFRS. Full transition to IFRS is delayed and is expected to take place from
2011.

Singapore
In Singapore the Accounting Standards Committee (ASC) is in charge of
standard setting. Singapore closely models its Financial Reporting Standards
(FRS) according to the IFRS, with appropriate changes made to suit the
Singapore context. Before a standard is enacted, consultations with the IASB
are made to ensure consistency of core principles.[18]

South Africa
All companies listed on the Johannesburg Stock Exchange have been required
to comply with the requirements of International Financial Reporting Standards
since 1 January 2005.
The IFRS for SMEs may be applied by 'limited interest companies', as defined
in the South African Corporate Laws Amendment Act of 2006 (that is, they are
not 'widely held'), if they do not have public accountability (that is, not listed
and not a financial institution). Alternatively, the company may choose to apply
full South African Statements of GAAP or IFRS.
South African Statements of GAAP are entirely consistent with IFRS, although
there may be a delay between issuance of an IFRS and the equivalent SA
Statement of GAAP (can affect voluntary early adoption).

Taiwan
Adoption scope and timetable
(1) Phase I companies: listed companies and financial institutions supervised by
the FSC, except for credit cooperatives, credit card companies and insurance
intermediaries:
A. They will be required to prepare financial statements in accordance with
Taiwan-IFRS starting from January 1, 2013.
B. Early optional adoption: Firms that have already issued securities overseas,
or have registered an overseas securities issuance with the FSC, or have a
market capitalization of greater than NT$10 billion, will be permitted to prepare
additional consolidated financial statements1 in accordance with Taiwan-IFRS
starting from January 1, 2012. If a company without subsidiaries is not required
to prepare consolidated financial statements, it will be permitted to prepare
additional individual financial statements on the above conditions.
(2) Phase II companies: unlisted public companies, credit cooperatives and
credit card companies:
A. They will be required to prepare financial statements in accordance with
Taiwan-IFRS starting from January 1, 2019 B. They will be permitted to apply
Taiwan-IFRS starting from January. 1, 2013.
(3) Pre-disclosure about the IFRS adoption plan, and the impact of adoption To
prepare properly for IFRS adoption, domestic companies should propose an
IFRS adoption plan and establish a specific taskforce. They should also disclose
the related information from 2 years prior to adoption, as follows:
A. Phase I companies: (A) They will be required to disclose the adoption plan,
and the impact of adoption, in 2011 annual financial statements, and in 2012
interim and annual financial statements. (B) Early optional adoption: a.
Companies adopting IFRS early will be required to disclose the adoption plan,
and the impact of adoption, in 2010 annual financial statements, and in 2011
interim and annual financial statements. b. If a company opts for early adoption
of Taiwan-IFRS after January 1, 2011, it will be required to disclose the
adoption plan, and the impact of adoption, in 2011 interim and annual financial
statements commencing on the decision date.
B. Phase II companies will be required to disclose the related information from
2 years prior to adoption, as stated above.

Year Work Plan

2008 Establishment of IFRS Taskforce
2009~2011

 Acquisition of authorization to translate IFRS

 Translation, review, and issuance of IFRS
 Analysis of possible IFRS implementation problems,and resolution thereof
 Proposal for modification of the related regulations and supervisory
mechanisms
 Enhancement of related publicity and training activities
2012

 IFRS application permitted for Phase I companies

 Study on possible IFRS implementation problems,and resolution thereof
 Completion of amendments to the related regulations and supervisory
mechanisms
 Enhancement of the related publicity and training activities
2013

 Application of IFRS required for Phase I companies,and permitted for Phase

II companies
 Follow-up analysis of the status of IFRS adoption,and of the impact
2014

 Follow-up analysis of the status of IFRS adoption,and of the impact

2015 8Applications of IFRS required for Phase II companies

Expected benefits
(1) More efficient formulation of domestic accounting standards, improvement
of their international image, and enhancement of the global rankings and
international competitiveness of our local capital markets;
(2) Better comparability between the financial statements of local and foreign
companies;
(3) No need for restatement of financial statements when local companies wish
to issue overseas securities, resulting in reduction in the cost of raising capital
overseas;
(4) For local companies with investments overseas, use of a single set of
accounting standards will reduce the cost of account conversions and improve
corporate efficiency.
Quote from Accounting Research and Development Foundation

Turkey
Turkish Accounting Standards Board translated IFRS into Turkish in 2005.
Since 2005 Turkish companies listed in Istanbul Stock Exchange are required
to prepare IFRS reports.