CHAPTER ONE

Introduction to and objectives of IFRS

INTERNATIONAL FINANCIAL REPORTING IS ON THE MOVE, and common world-wide business and financial reporting formats are developing. The recent so-called global financial crisis emphasises the need for financial reporting standards. In effect, International Financial Reporting Standards can be a precursor and an example for a much needed global framework for financial and legal standards.

The goal of the IFRS Foundation (IFRSF) is to develop a single set of high-quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated accounting principles.

As of 2005, the European Union (EU) requires all publicly traded entities in member states to prepare their consolidated financial statements under IFRS. These accounting standards may differ significantly from the US-based Generally Accepted Accounting Principles (GAAP) previously applicable.

More than 150 countries now require the application of IFRS in one form or another. The International Accounting Standards Board (IASB) and the US Financial Accounting Standards Board (FASB) are actively pursuing convergence projects. China, India, Japan and other countries have been agreed upon convergence. In May 2012, the Pan African Federation of Accountants (PAFA) – representing 34 African nations – made a broad policy resolution to adopt IFRS, IPSAS and ISA.

Once global convergence is completed by the IASB, financial statements will be fully ...

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