International Financial Reporting Standards

Harmonisation

Due to the increasingly global nature of investment and business operation there has been a move towards the 'internationalisation' of financial reporting. This 'harmonisation' was considered necessary to provide consistent and comparable information to an increasingly global audience.

If companies use different methods of accounting then before any decisions can be made about different entities the accounts would have to be re-written so that the accounting concepts and principles applied are the same; only then relevant comparisons be made.

Legal stature

IFRS's are not enforceable in any country; they are developed by an international organisation that has no international authority. To become enforceable they must be adopted by a country's national financial reporting standard setter.

Within the European Union IFRS were adopted for all listed entities in 2005. Other countries to have adopted IFRS include; Argentina, Australia, Brazil, Canada, Russia, Mexico, Saudi Arabia and South Africa. The US, China and India are going through a process of 'convergence,' whereby they are updating their national standards over time so that they are consistent with IFRS.

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