What is IFRS?
Companies are required to maintain their accounts as per the prescribed guidelines. The companies which are having public investment are required adhere to higher compliance levels which includes public disclosures of the accounts of the company. They are required to report the financial statements to the stock exchanges as well as the annual accounts.
Post globalization the foreign investors also started investing in the local companies. In view of this a need was felt to have a uniformity in the treatment of the transactions affecting the financial statements. International Financial reporting Board prescribed the uniform standards for display and reporting of the financial transactions. It helps as a common language to understand the financial details for everybody across the world in a similar manner.
Prior to IFRS there were different accounting standards adopted by various counties such as Indian GAAP, Canadian GAAP, US GAAP and in such cases a company which is listed in various countries need to prepare and report the financials according the GAAP applicable in that country. It was a tedious job company especially for big corporations and non compliance of this requirement would call for penalties from the regulatory bodies of that country. Hence due to the changed way of business IFRS was introduced which made the accounting procedure more simple.
Benefits in Uniform Reporting
IFRS makes life easier for the big corporate and it also makes the investors from other countries to get a clear idea of the company they are investing into. Also for the domestic companies it becomes easier to raise funds in case they are following IFRS.
This is adopted by most of the countries except a few including United States and there is a specific timeline set for all to comply with the same. The convergence of IFRS and US GAAP would have key changes in accounting and reporting for lease contracts, Revenue Recognition and treatment of expenses.
Internal Auditors and the Accounting Firms do play in convergence of GAAP and the IFRS. It should not be confused with International Accounting Standards as they are different and older than the reporting standards.