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An IFRS financial statement is a document prepared by a corporation delineating all of its financial activities in accordance with reporting standards that are used for companies all over the world. This statement should be in compliance with International Financial Reporting Standards (IFRS) as determined by the International Accounting Standards Board (IASB). By completing an IFRS financial statement, which may take the form of an income statement or balance sheet, a corporation is fulfilling its obligation to report its finances in compliance with standards upheld throughout the world. In this way, uniformity among corporations all over the world is engendered, which benefits investors everywhere.
Corporations, no matter where they are located, are generally required to make known all of the money coming into and going out of their organizations. This way the financial information can be viewed by all those interested in it, including management, stockholders, and possible investors. Many of the rules and regulations that bind these corporations in their reporting activities have been set forth by the IASB as international financial reporting standards. Corporations that follow these standards must prepare a proper IFRS financial statement.
When a company files an IFRS financial statement, it is providing a thorough and accurate look at its financial operations. By doing this, it is also ensuring that its financial reporting will be held to the same standards as countries around the globe. This is increasingly necessary as companies do business not only within the borders of their own countries, but also in international locations.
The two main components of an IFRS financial statement are the balance sheet and the income statement. A balance sheet is a record of all of a company's assets and liabilities. From this document, a company's net worth may be determined. By contrast, an income statement amasses all of a company's revenue from a set period and compares it to the expenses incurred over that same period. This document shows the net income of a company.
For companies who have been following a different set of standards, preparing an IFRS financial statement can be a major adjustment. As an example, many corporations in the United States have had to switch over from their own set of generally accepted accounting principles to a method based on the IFRS. While there is usually some overlap from disparate standards, the differences can be enough that compliance with the IFRS can be a learning process.
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