IFRS Foundation is an independent, non-profit private organization that has been working for public interest. The principal objectives of the IFRS Foundation is are to
- To develop a single set of high quality, understandable, enforceable and globally accepted International Financial Reporting Standards (IFRSs) with the help of a standard setting body, the International Accounting Standards Board (IASB).
- To advocate the use and stringent application of these standards
- To take into account the financial reporting needs of emerging economies and small and medium sized entities (SMEs) and
- To advocate and ease the adoption of IFRSs, being the standards and clarifications given by IASB, through the merging of national accounting standards and IFRSs.
IFRS has its standards numbered such as IFRS 1, IFRS 2, IFRS 3, etc. Each of the number signifies a standard for each type of account and its treatment.
IFRS 1: IFRS 1, is a First-time Adoption of International Financial Reporting Standards. IFRS 1 is more about first time adoption of standards. IFRS 1 is about full retrospective of all standards that are in effect at the date of balance sheet closing or the date of reporting data. IFRS requires organizations to (1). Identify the initial Financial Statements, (2) to make an opening balance sheet at the date on which validation has been done, (3) to choose those accounting policies that adhere to the IFRS standards and apply these policies in retrospect to all the listed in the first financial statement, (4) to make thorough disclosures to justify the transition.
According to IFRS 1, the opening balance sheet should:
- Include all those assets and liabilities that have been listed
- Exclude all those assets and liabilities that have not been listed
- Measure all the accounting items with respect to the standards
IFRS 2: IFRS 2 is about Share-based Payment. According to IFRS, the scope of share-based payments is much broader than simple employee stock options. IFRS recognizes and covers all those transactions which involve giving out shares to be settled with cash. Share-based Payment requires an organization to acknowledge share-based payment transactions such as granted shares, share options or share appreciation rights in its financial statements. These include transactions conducted with employees (under employee stock option plan) or with other parties in lieu of cash. These unique requirements are contained for equity-settled in cash and cash-settled share based payment transactions.
IFRS 3: IFRS 3 is about Business Combinations. According to IFRS 3 standard, a Business Combination is a transaction or an event in which an acquirer acquires one or more businesses. A business is defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return directly to investors or other owners, members or participants. IFRS 3 recognizes that the acquirer must be identified for all business combinations.
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