Many countries already operate under International Financial Reporting Standards (IFRS), while the US, among other countries, may be joining the fray. To simplify the conversion from your local reporting standard to IFRS and better manage the associated compliance risk, organizations must adopt strategies and best practices based on a proven compliance framework.
A compliance framework is a holistic management architecture that involves the concepts, standards, precepts, and processes that drive the development, management, and adoption of regulations influencing how businesses are conducted locally or globally. Such regulations include Sarbanes-Oxley, Basel II, and International Financial Reporting Standards, among others.
International Financial Reporting Standards (IFRS) is a set of standards that finds its root in International Accounting Standards (IAS), which seeks to harmonize and synchronize the reporting requirements of different local reporting standards such as US and Canadian GAAP. The intention is to bring transparency, consistency, and uniformity to global businesses and financial reporting. It aims at consolidating financial reporting across the enterprise while encouraging detailed disclosure of the books of companies listed on the stock exchange.
Although the adoption of IFRS has challenges, the benefits can be enormous. These benefits include comprehensive reporting, improved access to capital, greater transparency, comparability for investors, and enhanced decision making. With IFRS, global companies can better consolidate their accounts, perform subsidiaries’ financial appraisals, and access global funds. For example, a company in Nigeria trying to access global funds or capital in the US is better positioned for favorable consideration if its financial statements are prepared based on a globally acceptable standard. The inherent disclosures help enforce transparency and comparability with other companies. IFRS is based on the premise that an entity continues to be in business for the foreseeable future (called a going concern) and that the effect of a business transaction is recognized when the transaction takes place and not necessarily when cash is received (called accruals).