International Financial Reporting Standards (IFRS) is a unified reporting standard adopted by most countries today. In the past, every country had their own set of accounting and reporting standards based on factors such as individual legal systems, political systems, capital markets, etc. and this led to differences in how transactions get reported from one country to the next.
Back in 1973, accountancy bodies in 10 countries together formed The International Accounting Standards Committee. The committee proposed development of one set of international reporting standards. By 2000, over 100 countries were in agreement and 41 international accounting standards were in place. However, many countries continued to use their own reporting standards.
Since 2000, this is quickly changing. The International Accounting Standards Board replaced the IASC and continues issuing international accounting standards. Today, over 100 countries have adopted the use of IFRS. Japan and the United States are the last two large countries to officially adopt the now globally accepted IFRS standard. However, both will adopt the use of IFRS in the next several years.
The world is so much smaller thanks to the use of technology. Global business is now the norm rather than the exception. Investments are now aimed at the global marketplace, and to succeed companies need to understand the financial reporting standards of the companies they will work with. IFRS helps streamline accounting procedures internationally.
IFRS offers several advantages that will create a unique opportunity for privately held companies struggling with the issue of growth, increasing production costs, and a shrinking marketplace.. It has been well-documented that China and India will have a strong sustainable economic growth that will provide an opportunity for privately-held companies to access additional customers.
Changes and developments are evolving around IFRS constantly. Kothari Auditors & Accountants are committed to develop the expertise to assist our current and future clients in this area.
By adopting IFRS, privately-held companies will be received well in the global marketplace and perceived as an international player. This will afford them an opportunity for growth that, for the most part, has only been afforded to U.S. publically-held companies with an abundance of financial resources to gain access to international customers, suppliers and world capital markets, reducing some of the risks and barriers of setting up international joint venture supply arrangements and importing/exporting.
The aim of this article is to keep you informed of recent developments with IFRS. We would very much appreciate hearing comments or questions you may have on how we can enhance it or questions or concerns on IFRS.