Is there a way for companies and organizations around the globe to have unified accounting practices and standards? It’s a question that aspiring accounting administrators may have wondered, and fortunately, there’s an answer. The International Financial Reporting Standards (IFRS) is a global financial language that allows businesses to understand and compare companies across international lines. It works to harmonize the financial reporting of companies by providing a standard set of rules and regulations.
During your studies you will learn about many accounting related activities such as preparing invoices, accounts payable/receivables, budgeting, and maintaining financial records. What you might not know just yet is that many of these activities follow IFRS standards and regulations.
If you’re interested in pursuing a promising career in the financial sector, read on to discover more about the IFRS.
The IFRS was founded as a way of unifying the European Union’s accounting practices in the early 2000s. The idea quickly took hold and by 2003 Australia, Hong Kong, South Africa, and New Zealand were all jumping on board to adopt this new standard of financial reporting. By 2005 nearly 7,000 companies in 25 different countries were switching from the traditional method of reporting, Generally Accepted Accounting Principles (GAAP), to the IFRS.
As graduates of accounting administration school might know, it was only in 2007 that Canada started the process to implement IFRS into Canadian businesses. By 2011 it was required that all publicly traded companies (those on the stock market) follow the IFRS accounting standards, while privately owned companies may continue to comply with GAAP standards.
During your career as an accounting administrative worker you may come across several different types of documentation that suggest how a company’s financial health is doing. Many of these documents are regulated and mandated by the IFRS. There are 31 accounting standards the IFRS lists which encompass many rules for reporting a company’s financial position.
There are also four crucial and specific documents the IFRS regulates. First, the components of the statement of financial position, also known as a balance sheet, are closely regulated. The balance sheet demonstrates the company’s assets and liabilities (debts) at a current point in time. Second, the statement of comprehensive income which shows the company’s net income after all factors. Third, the statement of the changes in equity, which demonstrates a company’s retained earnings after they pay out dividends to investors and factor in profit and loss from operations. And finally, the statement of cash flow, which summarizes a company’s transactions with hard cash (not credit). The IFRS keeps everyone reporting the same way, so no company can manipulate the system and report something in a certain way that makes their financial position look better than it actually is.
After graduating from an accounting administration course you may work for advertising firms, insurance companies, or even retail stores and manufacturers. You may even end up working for a company that has businesses in many countries. Companies that operate in many different countries, such as Starbucks or Apple, benefit from implementing IFRS standards because it provides a common language for their organization to use. So when comparing sectors of the business or stores located in different countries, it is like comparing apples to apples instead of apples to oranges. However, even smaller companies benefit from adopting IFRS principles over the growingly outdated GAAP, since it can help them stay competitive in today’s globalized markets.
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