International Financial Reporting Standards (IFRS) are standards and interpretations adopted by the International Accounting Standards Board (IASB).

Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS). IAS were issued between 1973 and 2001 by the board of the International Accounting Standards Committee (IASC). In April 2001 the IASB adopted all IAS and continued their development, calling the new standards IFRS.

Structure of IFRS

IFRSs are considered a "principles based" set of standards in that they establish broad rules as well as dictating specific treatments.

International Financial Reporting Standards comprise:

• International Financial Reporting Standards (IFRS) - standards issued after 2001
• International Accounting Standards (IAS) - standards issued before 2001
• Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC) - issued after 2001
• Standing Interpretations Committee (SIC) - issued before 2001

There is also a Framework for the Preparation and Presentation of Financial Statements which describes some of the principles underlying IFRS.

Framework

The Framework for the Preparation and Presentation of Financial Statements states basic principles for IFRS.

Objective of financial statements

The framework states that the objective of financial statements is to provide information about the financial position, performance and changes in the financial position of an entity that is useful to a wide range of users in making economic decisions.

Underlying assumptions

The underlying assumptions used in IFRS are:

• Accrual basis - the effect of transactions and other events are recognised when they occur, not as cash is received or paid
• Going concern - the financial statements are prepared on the basis that an entity will continue in operation for the foreseeable future

Qualitative characteristics of financial statements

The Framework describes the qualitative characteristics of financial statements as being

• Understandability
• Relevance
• Reliability and
• Comparability.

Elements of financial statements

The Framework sets out the statement of financial position (balance sheet) as comprising:-

• Assets - resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity
• Liabilities - a present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits
• Equity - the residual interest in the assets of the entity after deducting all its liabilities