Over the past decades, a lot has been done to solve the problem of unification of accounting and reporting at the international level. One approach led to the formation of International Financial Reporting Standards (IFRS). The main purpose of the innovation is to coordinate the rules and principles of accounting, to facilitate the adoption of managerial decisions.
IFRS: goals and objectives
International Financial Reporting Standards is one of the approaches to solving the problems facing an accountant. IFRS establishes general principles for accounting and financial reporting. These provisions are in the form of standardized recommendations and interpretations.
Professionals should be aware that the standards do not provide direct accounting techniques. The posting options for specific cases are not detailed here. IFRSs fulfill a more modest task - they contain descriptions of competent financial reporting.
One of the goals of the standards is to minimize national differences in accounting statements. Application of IFRS makes it possible to compare the results of reports, makes information more reliable. With the standards, the leader gets the opportunity to make informed and balanced management decisions.
The main objectives of IFRS:
- determination of the procedure for the direct preparation and presentation of financial statements;
- development of criteria for the recognition of items and transactions in the reporting;
- classification of accounting objects;
- unification of methods of reflection in the reporting of accounting objects;
- determination of the permissible amount of information to be disclosed in the reports.
Why IFRS reporting is important
In Western accounting practice, the concept of financial reporting (literally: "financial reporting") is widely used. Such reporting includes the balance sheet of the enterprise; gains and losses report; reports reflecting the movement of capital and cash; explanatory note. It should be noted that the first two reports from the above list in IFRS are called differently: the statement of financial position and the statement of comprehensive income.
Financial statements prepared and prepared in accordance with international standards are used all over the world. The information on the website of the IASB indicates that now the preparation of reports according to such standards is a requirement for enterprises in 105 countries of the world. First of all, we are talking about those companies that are part of the financial sector (insurance companies, banking institutions), as well as companies that carry out operations on national stock exchanges.
Those companies whose paper assets (bonds, shares) are listed on the financial markets of the European Union must, since 2005, submit consolidated financial statements based on IFRS principles. This requirement fully applies to the UK. The financial markets of this country are considered the largest after the USA and Japan. For example, to obtain a listing on depositary receipts on the London Stock Exchange, you need to provide not only a prospectus of securities, but also financial statements according to international standards for the last three years.
About a tenth of the stock and bond transactions carried out on the London Stock Exchange are carried out by companies from Russia. Here is some of them:
- Gazprom;
- Lukoil;
- Tatneft;
- Novatek;
- Sberbank;
- AFK Sistema;
- VTB.
Germany is no exception. The Frankfurt Stock Exchange is one of the oldest and largest in Europe. Here, too, to obtain a listing, reporting is required in accordance with IFRS. At the same time, the requirement to submit consolidated statements in accordance with standard rules applies not only to foreign companies, but also to those enterprises that are registered in Germany. Securities of several dozen Russian companies are traded on the Frankfurt Stock Exchange.
IFRS are also applied in the United States, where national companies prepare reports in accordance with US GAAP rules. Foreign companies that are listed in the US markets can report to international standards. At present, purposeful intensive work is underway to bring the American and international accounting and reporting systems closer together.
IFRS and Russia
What is happening in Russia in this regard?
In the Russian Federation, accounting and reporting are conducted in accordance with Russian accounting rules and standards (RAS). However, recently, all banks and insurance companies in the country, along with reporting in accordance with RAS, provide reporting based on IFRS. Since 2012, the preparation of financial statements in accordance with IFRS has become mandatory for companies trading on domestic stock exchanges. But so far this applies only to consolidated financial statements. The accounting statements of the companies that are part of the group are still kept in accordance with RAS rules.
By providing reporting in accordance with international standards, Russian enterprises have the opportunity to enter the stock markets of many countries of the world. This is very important, especially considering the fact that bank loans outside the Russian Federation are much cheaper. Foreign banking institutions do not understand and do not accept statements that are made in accordance with Russian standards. Finding a common language with the management of banks when obtaining loans is precisely what helps the reporting prepared and filed in accordance with IFRS.
Another advantage of IFRS is obtaining reliable and sufficiently complete information about the company that borrows funds. Before opening a credit line for their clients, some reputable Russian banks already now require them to provide financial statements in IFRS format together with Russian financial statements.
Briefly about international standards
In essence, IFRS is a collection of documents and explanations to them, which defines the procedure for preparing financial statements. Such standards are developed and adopted by the IASB. Its headquarters are located in London. To date, more than four dozen standards and more than twenty explanations to them have been developed. The official translation of the standards can be found on the website of the Ministry of Finance of the Russian Federation. It should be borne in mind that with the appearance of new standards, the content of the previous ones may slightly change, individual paragraphs and definitions are being clarified.
IFRS differ from RAS in that only the principles of financial reporting are indicated here. In international standards, there is no chart of accounts, a list of transactions. There are no rules that strictly define the ways of keeping records. But in the Russian Federation, the documentary registration of all operations and technical methods of accounting are very strictly regulated.
IFRS are intended for use in commercial enterprises, but the standards may also be useful for non-profit organizations: they may well apply IFRS when it is necessary to interact with foreign partners.
What does knowledge of IFRS give to domestic accounting specialists? First of all - career prospects. Specialists who know international standards are in demand not only in the capital of Russia, but also in other regions of the country. There is a tendency to expand the geography of such regions. Job descriptions related to finance now contain an indication that knowledge of IFRS when applying for a position will be an advantage. And this applies not only to chief accountants or financial directors of enterprises, but also to specialists in other specialties of a financial orientation, as well as to lawyers. First of all, large companies with a large share of foreign capital show interest in specialists who understand IFRS.