International Financial Reporting Standards (IFRS) are international accounting standards that set out how certain transactions are accounted for. Let’s start at the beginning, trying to learn more about the origin of IFRS.
Origin of IFRS
Implemented within the European Union, IFRS standards were created to make accounting more easily accessible across the continent by establishing a common accounting language.Since then IFRS standards have expanded globally and are now playing an important role in synchronizing accounting standards around the world. From 2001 onwards, IFRS standards issued and managed by the IFRS Foundation, began to replace the International Accounting Standards (IAS).
Although the IFRS standards have been developed in Europe, they are no longer a regional concept and are now used by more than 120 countries. In many countries, national accounting standards are gradually being replaced by IFRS standards that greatly favor international trade or investment. However, several economic powers, such as the United States, remain undecided about the adoption of IFRS.
IFRS for Small Business or SMEs
The IRFS Foundation provides a comprehensive list of international accounting standards, but these standards often have little use or are too complex for small businesses. To address this, the IFRS Foundation has created the IFRS for SMEs (or IFRS for SMEs standard), the terms of which have been simplified in relation to the original standards:
- some subjects of the complete IFRS standards have been removed because they are not relevant for small companies,
- some accounting options under full IFRS standards are not allowed because small businesses can use simpler methods,
- many of the principles in the original IFRS standards have been simplified,
- small businesses are not required to disclose so much information,
- the text of the IFRS standards has been rewritten in order to be simplified and more accessible to all.
- reduction of regulatory compliance