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Saint Joseph's University Haub School of Business | Department of Accounting
Department of Accounting
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    • STAR Scholars Program
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Overview
IFRS Essentials
Additional IFRS Resources

International Financial Reporting Standards

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Overview

Different generally accepted accounting principles (GAAP) have been developed in various countries over the past few decades. These differences have arisen largely due to unique legal, regulatory, litigious, social, economic, religious, and cultural environments. They result in financial statements that are not comparable and difficult for users to interpret. This in turn acts as a barrier for global capital movement, potentially resulting in less than optimal allocation of capital.

More recently, there has been a movement toward harmonization and convergence of GAAP. The most significant initiative has been led by the International Accounting Standards Board (IASB), formerly known as the International Accounting Standards Committee. This group has primary responsibility for the development of International Financial Reporting Standards (IFRS).

IFRS Essentials

All accounting courses at Saint Joseph's University will begin including international accounting topics. Specifically, the Financial and Accounting Information Systems (FAIS) III course (ACC 307) has a unit designed to cover the essentials of IFRS. 

  • IFRS is designed to be used by publicly traded companies. U.S. GAAP and other National GAAPs apply to one country or region. The current issue at hand with the adoption of IFRS is that many countries promote IFRS as an option while few require it.

  • IFRS allows for a uniform financial reporting standard. As we continue to evolve into a global economy it will be important for international business to have comparable financial statements. For international companies, this will allow one standard of financial statements to be used by all subsidiaries regardless of the country they operate in.

  • US GAAP

    • FAF - Financial Accounting Foundation
    • FASB - Financial Accounting Standards Board
    • FASAC - Financial Accounting Standards Advisory Committee

     

    FASB is responsible for issuing the following pronouncements:

    • Standards, interpretations, and staff positions
    • Financial accounting concepts
    • Emerging issues task force statements

    IFRS

    • IASC - International Accounting Standards Committee
    • IASB - International Accounting Standards Board

     

    IASB is committed to producing IASs (International Accounting Standards).

  • "Financial statements are a structured representation of the financial position and financial performance of the entity" (IAS 1.9).

    The main statements are:

    1. Statement of financial position
    2. Statement of comprehensive income
    3. Statement of changes in equity
    4. Statement of cash flows
    5. Notes including significant accounting policies and explanatory information
    6. Statement of financial position at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement.

    Irene M. Wiecek and Nicola M. Young. IFRS Primer - International GAAP Basics.

    Additionally, with IFRS the financial statement format is often different.

  • A few of the major differences include:

    • US GAAP is considered rules-based while IFRS is principle-based. IFRS looks to provide a framework to which professional judgment may be applied. It is argued that the principles-based foundation of IFRS allows too much room for bias. On the other hand, it is also argued that rules-based GAAPs are too large.
    • Presentation and disclosure of financial statements (See IAS 1).
    • Recognition, if recognized, as well as how and when. (See IAS 2 for inventory recognition, IAS 8 for unusual items).
    • Measurement — how cost is determined. (See IAS 16 for fair value adjustments, IAS 12 for income taxes).

Additional IFRS Resources

  • IAS Plus
  • IFRS Reporting
  • IFRS Institute
  • IFRS Convergence

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