IFRS Conversion Services
                     

IFRS 
Conversion 
Services
-By Himani 
Srivastava

International Financial Reporting Standards
International Financial Reporting Standards, commonly called IFRS, are 
accounting standards issued by the IFRS Foundation and the 
International Accounting Standards Board (IASB). They constitute a standardized 
way of describing the company’s financial performance so that company 
financial statements are understandable and comparable across international 
boundaries. They are particularly relevant for companies with shares or securities 
listed on a public stock exchange.

IFRS has replaced many different national accounting 
standards around the world but have not replaced the 
separate accounting standards in the United States where 
US GAAP is applied.
History of IFRS
The International Accounting Standards Committee (IASC) 
was established in June 1973 by accountancy bodies 
representing ten countries. It devised and published 
International Accounting Standards (IAS), interpretations and 
a conceptual framework. These were looked to by many 
national accounting standard-setters in developing national 
standards.

In 2001 the International Accounting Standards Board (IASB) replaced the IASC with a 
remit to bring about convergence between national accounting standards through the 
development of global accounting standards. During its first meeting, the new Board 
adopted existing IAS and Standing Interpretations Committee standards (SICs). The 
IASB has continued to develop standards calling the new standards "International 
Financial Reporting Standards" (IFRS).
In 2002 the European Union (EU) agreed that from 1 January 2005, International 
Financial Reporting Standards would apply for the consolidated accounts of the EU 
listed companies, bringing about the introduction of IFRS to many large entities. Other 
countries have since followed the lead of the EU.

Adoption of IFRS
IFRS Standards are required in more than 140 jurisdictions and permitted in many 
parts of the world, including South Korea, Brazil, the European Union, India, 
Hong Kong, Australia, Malaysia, Pakistan, GCC countries, Russia, Chile, 
Philippines, South Africa, Singapore, and Turkey.
To assess progress towards the goal of a single set global accounting standards, 
the IFRS Foundation has developed and posted profiles about the use of IFRS 
Standards in individual jurisdictions. 
These are based on information from various sources. The starting point was the 
responses provided by standard-setting and other relevant bodies to a survey that the 
IFRS Foundation conducted. As of August 2019, profiles are completed for 166 
jurisdictions, with 144 jurisdictions requiring the use of IFRS Standards.
Due to the difficulty of maintaining up-to-date information in individual jurisdictions, 
three sources of information on current worldwide IFRS adoption are recommended:
● IFRS Foundation profiles page
● The World Bank
● International Federation of Accountants
Ray J. Ball described the expectation by the European Union and others that IFRS 
adoption worldwide would be beneficial to investors and other users of financial 
statements, by reducing the costs of comparing investment opportunities and increasing 
the quality of information. Companies are also expected to benefit, as investors will be 
more willing to provide financing. Companies that have high levels of international 
activities are among the group that would benefit from a switch to IFRS Standards. 
Companies that are involved in foreign activities and investing benefit from the switch 
due to the increased comparability of a set accounting standard, However, Ray J. Ball 
has expressed some skepticism of the overall cost of the international standard; he 
argues that the enforcement of the standards could be lax, and the regional differences 
in accounting could become obscured behind a label. He also expressed concerns about 
the fair value emphasis of IFRS and the influence of accountants from non-common-law 
regions, where losses have been recognized in a less timely manner.
US GAAP
US GAAP remains separate from IFRS. The Securities Exchange Committee (SEC) requires the use of 
US GAAP by domestic companies with listed securities and does not permit them to use IFRS; US GAAP 
is also used by some companies in Japan and the rest of the world.
In 2002 IASB and the Financial Accounting Standards Board (FASB), the body supporting US GAAP, 
announced a program known as the Norwalk Agreement that aimed at eliminating differences between 
IFRS and US GAAP. In 2012 the SEC announced that it expected separate US GAAP to continue for the 
foreseeable future but sought to encourage further work to align the two standards.
IFRS is sometimes described as principles-based, as opposed to a rules-based approach in US GAAP; 
so in US GAAP there is more instruction in the application of standards to specific examples and 
industries.
Conceptual Framework of Financial 
Reporting
The Conceptual Framework serves as a tool for the IASB to 
develop standards. It does not override the requirements of 
individual IFRSs. Some companies may use the Framework 
as a reference for selecting their accounting policies in the 
absence of specific IFRS requirements.

The Conceptual Framework states that the primary purpose of 
financial information is to be useful to existing and potential 
investors, lenders and other creditors when making decisions 
about the financing of the entity and exercising rights to vote 
on, or otherwise influence, management's actions that affect 
the use of the entity's economic resources.
Users base their expectations of returns on their assessment 
of:
● The amount, timing and uncertainty of future net cash 
inflows to the entity;
● Management's stewardship of the entity’s resources.

Qualitative characteristics of financial information  Conceptual Framework 
for Financial Reporting defines the fundamental qualitative characteristics of 
financial information to be:
 Relevance; and
● Faithful representation
The Framework also describes enhancing qualitative characteristics:
● Comparability
● Verifiability
● Timeliness
● Understandability
Elements of financial statements Conceptual Framework 
defines the elements of financial statements to be:- Asset: A 
present economic resource controlled by the entity as a result 
of past events which are expected to generate future 
economic benefits
● Liability: A present obligation of the entity to transfer an 
economic resource as a result of past events
● Equity: The residual interest in the assets of the entity 
after deducting all its liabilities
● Income: increases in economic benefit during an 
accounting period in the form of inflows or enhancements 
of assets, or decrease of liabilities that result in increases 
in equity. However, it does not include the contributions 
made by the equity participants (for example owners, 
partners or shareholders).
● Expenses: decreases in assets, or increases in liabilities, 
which result in decreases in equity. However, these do not 
include the distributions made to the equity participants.
● Other changes in economic resources and claims: 
Contributions from holders of equity and distributions to 
them
Recognition of elements of financial statements
An item is recognized in the financial statements when:
● it is probable that future economic benefit will flow to or from an entity.
● the resource can be reliably measured
In some cases, specific standards add additional conditions before recognition is 
possible or prohibit recognition altogether.
An example is the recognition of internally generated brands, mastheads, publishing 
titles, customer lists, and items similar in substance, for which recognition is prohibited 
by IAS 38. In addition, research and development expenses can only be recognized as 
an intangible asset if they cross the threshold of being classified as 'development cost'.
Whilst the standard on provisions, IAS 37, prohibits the 
recognition of a provision for contingent liabilities, this prohibition 
is not applicable to the accounting for contingent liabilities in a 
business combination. In that case, the acquirer shall recognize 
a contingent liability even if it is not probable that an outflow of 
resources embodying economic benefits will be required.
Concepts of capital and capital maintenance
Concepts of capital maintenance are important as only income earned in excess of 
amounts needed to maintain capital may be regarded as profit. The Conceptual 
Framework describes the following concepts of capital maintenance:
● Financial capital maintenance. Under this concept, a profit is earned only if the 
financial amount of the net assets at the end of the period exceeds the 
financial (or money) amount of net assets at the beginning of the period, after 
excluding any distributions to, and contributions from owners during the period. 
Financial capital maintenance can be measured in either nominal monetary 
units or units of constant purchasing power;
● Physical capital maintenance. Under this concept, a profit is 
earned only if the physical productive capacity (or operating 
capacity) of the entity (or the resources or funds needed to 
achieve that capacity) at the end of the period exceeds the 
physical productive capacity at the beginning of the period, 
after excluding any distributions to, and contributions from 
owners during the period.
Most entities adopt a financial concept of capital maintenance. 
However, the Conceptual Framework does not prescribe any 
model of capital maintenance.
Thank You