Accounting and financial reporting has been undergoing some changes in the recent years. This change is mainly brought about by the adoption of the IFRS accounting by companies from more than 100 counties all over the world. These 100 countries have been previously using the GAAP or the Generally Accepted Accounting Principles. After seeing the many advantages of using the accounting, these countries have abandoned the GAAP and are now using the IFRS.
IFRS accounting is a set of standards that are created by the IASB. Majority of these standards are previously known as International Accounting Standards or IAS. The IAS was used from 1973 to 2001 by the International Accounting Standards Committee or the IASC. In 2001, the IAS was incorporated into the IASB and this led to the creation of the new standards that is now called the IFRS. There are only a few countries left in the world who have not yet adopted the accounting. This does not mean that these countries are against the accounting. These few countries are just biding their time until they fully adopt the accounting in the next few years.
The IFRS accounting was created for the use of profit-based companies to help them in the formulation of accurate financial statements. These financial statements based on the accounting should contain complete data such as operational performance, cash flow, and financial standing. These data are proven to be very useful for the public, investors, lenders, management and employees of these companies.
A complete financial statement based on the IFRS accounting should contain a balance sheet and statements that contain information about the company’s cash flow and income. The financial statement should also contain a statement of all the changes in the company’s equity. All these data are very important in the decision-making process of the management as well as investors. These data can also be used to guide the decision of future investors as they decide on whether a certain company is a worthy investment or not. In the accounting, the policies of the company are also an important part of its financial statement.
There are a lot of benefits to adopting the accounting and one of them is that it provides more detailed information as compared to the GAAP. The IFRS accounting is also less complicated which makes it easy to use and provides a more detailed reporting. International and local investors also prefer financial statements that follow the accounting guidelines.