The IFRS Foundation’s research indicates that International Financial Reporting Standards (IFRS) are the foundation for financial statement preparation for public interest entities in nearly 150 jurisdictions worldwide. This makes them globally recognised, with the notable exception of the USA, which relies on US GAAP.
Understanding IFRS terminology
The abbreviation ‘IFRS’ represents International Financial Reporting Standards. Occasionally, it’s presented in its plural form, ‘IFRSs’. While the IFRS Foundation and IASB have a preference for the term ‘IFRS Standards’, the abbreviation ‘IFRS’ is more frequently used by accounting professionals.
The landscape became more complicated when the IFRS Foundation ventured into sustainability disclosures, introducing titles such as IFRS S1 ‘General Requirements for Disclosure of Sustainability-related Financial Information’ and IFRS S2 ‘Climate-related Disclosures’. To differentiate, the IFRS Foundation began labelling the traditional IFRS as ‘IFRS Accounting Standards’. However, this precise terminology has not been embraced by the accounting community.
Each (accounting) standard has a title and number, for example, IFRS 2 denotes ‘Share-based Payment’, and IFRS 8 refers to ‘Operating Segments’. Prior to 2003, these standards were labelled ‘IAS’, an acronym for International Accounting Standards. These earlier standards retained their original titles. For instance, IAS 16 is titled ‘Property, Plant and Equipment’. When mentioning the standards collectively, you might see ‘IFRS/IAS’. However, ‘IAS’ is superfluous since ‘IFRS Standards’ or just ‘IFRS’ encompasses both the newer and older (IAS) standards.
In summary, the terms IFRS/IFRSs/IFRS Standards include (as defined in IAS 1.7):
- International Financial Reporting Standards.
- International Accounting Standards.
- IFRIC and SIC Interpretations.
Who develops IFRS?
The International Accounting Standards Board (IASB) is responsible for setting the IFRS. This board operates under the IFRS Foundation, an independent organisation dedicated to developing and promoting IFRS. The IASB conducts a transparent and thorough standard-setting process, with updates released after each IASB meeting. Upon the introduction of an IFRS Standard by the IASB, it typically undergoes endorsement at the local jurisdictional level, leading to its incorporation into local legislation.
The role of the IFRS Interpretations Committee
Serving as the interpretative arm of the IASB, the IFRS Interpretations Committee addresses application challenges and proposes official IFRS Interpretations. These interpretations are signified as ‘IFRIC’, for instance, IFRIC 21 represents ‘Levies’. Pre-2003 interpretations were labelled ‘SIC’, with several still in force today.
Often, the Committee deems an interpretation unnecessary in response to an enquiry, feeling that current IFRS offers adequate guidance. Under such circumstances, they release an agenda decision outlining the Committee’s position. According to the IFRS Foundation’s Due Process Handbook, agenda decisions constitute ‘explanatory material’ and ‘an entity is required to apply the applicable IFRS Standard(s), reflecting the explanatory material in an agenda decision’. These agenda decisions, available on IFRS.org, provide invaluable insights for specific application challenges. Summaries of these discussions are published in the IFRIC Update after each Interpretations Committee meeting.
Accessing IFRS
Registered users can access IFRS on IFRS.org. The free subscription grants access to the core content, excluding bases for conclusions (BC). For complete access, a paid subscription is needed. Alternatively, you can purchase a print version from the IFRS shop.
Though IFRS is mandatory for most public interest entities worldwide, typically, only the unaccompanied versions are integrated into local law. It’s crucial to understand that these additional documents aren’t mandatory elements of IFRS (refer to IAS 8.9). For instance, the EU’s official journal had unaccompanied IFRS translated into all EU languages in 2008, and new additions like IFRS 17 are included upon endorsement.