The company uses two main accounting standards. Generally accepted accounting principles [GAAP], based on rules, are accepted only in the United States. Moreover, International Financial Reporting Standards [IFRS] are based on principles and accepted on a global scale. Determining which standard to use depends on whether the company is doing business locally or internationally. Global companies can choose to follow IFRS managed by the International Accounting Standards Board [IASB] and are the framework for more than 120 countries abroad.
What is IFRS?
International Financial Reporting Standards [IFRS] is an international accounting framework designed to be used as a set of global accounting standards. IFRS focuses on the general principles of accounting and provides guidance on reporting financial performance and positions. In addition to the transparency, accountability and efficiency gained under the guidance of IFRS, the consistency of financial reporting makes it easier to compare financial results.
Who uses IFRS?
IFRS is being adopted by international companies worldwide. The standard is currently accepted by approximately 90 countries and 120 countries, including Europe, which requires domestic companies to follow IFRS. By adopting global accounting standards, it is easier for international companies to compete globally with local companies in well-known countries, raise funds from international investors, and provide financial details to stakeholders who may be global.
Why does IFRS take precedence over other standards?
As global companies need time and a good understanding of IFRS, they find standards more lenient than other companies. According to IFRS, companies do not need to provide as much detailed information as possible on income or expenses, for example, in accordance with US GAAP. Which safes and their subordinates are prepared for the appropriate timetable. In addition, in IFRS, only one inventory method is allowed under the first in first out [FIFO], and there is only one step subtraction method.
Benefits of IFRS
There are advantages and disadvantages to using both standards. However, according to IFRS, the advantages have drawbacks. For example, as mentioned earlier, IFRS focuses on general principles, providing guidance rather than specific rules. GAAP allows companies to choose between two in-stock [IEFO] or first-in, first-out [FIFO] valuation methods. According to IFRS, only the FIFO method is accepted; in addition, one of the biggest differences is that IFRS allows inventory reversal, but uses GAAP. In addition, IFRS allows capitalization of development costs rather than an increase in the year that occurred.
The future of IFRS
As more and more companies develop international business and more international investors. The company is turning to IFRS to be more attractive. As international investors and companies grow, the Securities and Exchange Commission [SEC] is considering adopting IFRS as the main US standard and aligning with international companies that have submitted IFRS to the US Securities and Exchange Commission.
Orignal From: What is IFRS?
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