To ensure information is presented in a consistent and transparent manner, is comparable and enforceable, standards are issued by organisations, for example, the IFRS Foundation.
Objective IFRS Foundation
The IFRS Foundation Foundation is a not-for-profit, public interest organisation established to develop high-quality, understandable, enforceable and globally accepted accounting and sustainability standards, The standards provide guidance on when to recognise (financial) transactions, there initial measurement and if applicable their subsequent measurement. In addition, the standards provide guidance on how information should be communicated to stakeholders in a company’s external reporting.
The standards are developed by two standard-setting boards:
- the International Accounting Standards Board (IASB); and
- the International Sustainability Standards Board (ISSB)
The IFRS Foundation has a three-tier governance structure, based on the two independent standard-setting boards of experts, governed and overseen by Trustees from around the world (IFRS Foundation Trustees) who in turn are accountable to a monitoring board of public authorities (IFRS Foundation Monitoring Board).
IFRS fosters transparency and trust in the global financial markets and the companies that list their shares on them. If such standards did not exist, investors would be more reluctant to believe the information presented to them by companies. IFRS also helps investors analyse companies by making it easier to perform “apples to apples” comparisons between one company and another and for fundamental analysis of a company’s performance.
The history of the IFRS foundation
The International Accounting Standards board has developed the IFRS standards in 2001. With the aim of a clearer and more equal form of reporting. Previously this was the IAS, the international accounting standards, due to globalization. Companies do business with each other worldwide and must therefor speak the same financial language.
Therefor the European Union decided that all the listed companies within the European Union must comply with the IFRS standards. Nowadays, not only companies in the European Union use the IFRS standards, but also companies outside the European Union.
Features of the IFRS standards
The main reasons why countries adopt the IFRS standards from the IFRS foundation are the following:
- The rules are bases on principles instead of rules like the GAAP for example.
- Revenue is recorded when a certain value has been delivered. It is therefor possible that part of the agreement has already been fulfilled, but another part has not yet been fulfilled. In that case, you already book the completed part as revenue. This makes your turnover figure more representative of what is going on in reality.
- Stocks are calculated via the FIFO system, so that you have a realistic picture of the actual situation.
The IFRS foundation and Fidugius
Fidugius developed a smart accounting & reporting solution in which the IFRS standards are fully included. The smart and handy search function ensures that all the necessary knowledge to maintain the correct booking rules appears directly on the screen. This way you can be sure that you provide the correct information based on the IFRS foundation standards.
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