IAS/IFRS: definitions, application & stakes
What are IAS/IFRS standards?
International accounting standards set by an international organisation, the IASB (International Accounting Standards Board), they rely on a framework whose main objective is to create a single "language" for financial information throughout the world.
Why the two names?
In April 2001, after an overhaul aimed at giving a new momentum to the international standards project, the IASC (International Accounting Standards Committee) became the IASB and the standards published thereafter were called IFRS (International Financial Reporting Standards). This new name, from IAS (International Accounting Standards) to IFRS, stresses on the importance of financial information’s quality, as requested by the IASB.
What standards to apply?
The adoption of IAS/IFRS at 1 January 2005 will be based on the "stable platform" (body of standards published by 31 March 2004). However, standards keep evolving (through amendments/creations) and these changes will be taken into account only after 1 January 2005. To keep up to date, please refer to the IASB’s agenda.
World-wide application of IFRS
Who? Why?
A European obligation:
For listed companies in Europe
that publish consolidated accounts
as from 1 January 2005 (2007, if the only securities listed are debt securities)
What about other companies?
They may want to effect a transition to IFRS for the following reasons:
Before getting listed or resorting to listed debt securities;
For an unbiased assessment of the company’s financial value;
For easier access to foreign capital markets;
For easier access to loans from financial institutions;
To improve their accounts’ comparability with their peer group;
To comply with banks’ or others’ requirements;
Before entering or developing their presence on foreign markets.
Note: French GAAP are still mandatory for all those companies, which requires them to use both GAAP simultaneously.
One solution before the French authorities allow these companies to opt for IFRS would be to:
adopt all CNC recommendations, aiming at harmonising French GAAP with IFRS,
improve their current financial communication to include in their financial statements as many IFRS-required disclosures, within the limits allowed by French GAAP.What are the main impacts of a transition to IAS/IFRS?
Drafting a standard list of the main differences between your current GAAP and IAS/IFRS would bear little relevance. Each company’s transition to IAS/IFRS brings specific issues.
A transition to IFRS does not merely concern the Accounting department in your company, it involves almost every service! Including:
the need to overhaul the finance functions (reporting systems),
the "back-fitting" of IT systems,
an involvement of legal services in the project(substance analysis of contracts),
etc.The impacts of IFRS are specific to each company:
How to best prepare for your transition to IAS/IFRS?
An IAS/IFRS project must be equipped with a leader team, supported by management, and involve a representative from each major corporate service (accounting & financial, legal & tax, business lines, IT) to be successful. It is paramount:
to determine the scope of intervention to avoid wasting precious time,
to set a realistic retro-planning with immutable deadlines,
to train the project’s in-house contributors so that they are perfectly honed for company-specific issues,
not to forget the impacts on IT systems (collecting new information, changes to existing statements, etc.),
to eventually train the whole staff to the group’s new accounting procedures.To take up that challenge, the company must strengthen its skills. Cue in FinHarmony.
FinHarmony’s offer
FinHarmony offers to coach you through each step of your IAS/IFRS transition project:
Training:
Quiz
Assessment
Training
Consulting:
Diagnostic
Coaching
Expertise