1. What is IFRS concept?
IFRS stands for International Financial Reporting Standards which means International Financial Reporting Standards issued by the IASB (International Accounting Standards Board) with the goal of creating a global accounting language that helps financial statements Financial statements no longer distinguish between countries and regions, becoming transparent, unified, consistent, reliable for analysis and reference.
Watching: What is Ifrs?
The IFRS documentation pages are up to 3,000 pages long and are in English. So, IFRS is really challenging for those who are new to learning and intending to learn on their own.
What is IFRS concept? History of IFRS
The history of IFRS stems from the need to create a common accounting language after the post-World War II economic boom and the rise of multinational corporations. Thereby, IASC – International Accounting Standards Committee was born with 9 members. Includes: Netherlands, United States, Canada, Germany, Australia, United Kingdom, France, Mexico, Japan.
The importance of IFRS in the current context
2. The importance of IFRS today
IFRS is considered to be of great importance in the current Financial Accounting industry to create a common language to help make financial statements reliable, consistent across countries, effectively supporting accounting. Accountants, auditors, business owners, investors can understand the financial situation of organizations and businesses in different countries.
In addition, thanks to IFRS, the value of businesses and organizations is reflected more reasonably than the old applied accounting standards such as the old IAS or individual accounting standards. For example, VAS – Vietnamese Accounting Standards.
IFRS is important for listed companies as well as for multinationals and transnationals that want to convert their financial statements to the standards of the parent company, another country. Thanks to IFRS, the conversion of financial statements has been simplified, saving costs because there is a common language.
Finally, it can be said that IFRS is of great importance to help Vietnam deepen its economic integration with the world, remove barriers to financial reporting, and become more transparent to international investors in countries decide to apply the IFRS standard.
Why is there an IAS to IFRS conversion?
3. Why is there a transition of IAS and IFRS
? Before there was an international accounting standard IAS, why was there a transition from IAS to IFRS? The reason stems from three main reasons, which is that the original cost principle of IAS is no longer relevant, a major inadequacy when converting financial statements according to national accounting standards to IAS or vice versa, and IFRS trends. global direction to move from harmony to convergence.
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3.1. The original price principle of IAS is no longer relevant
The original cost principle of IAS increasingly does not represent the true value of liabilities and assets in the context of the information technology boom, derivatives are changing day by day, and value-added investment activities are becoming increasingly popular. trend. Therefore, the principle of fair value is increasingly showing its advantages.
Although some IAS standards also use the principle of fair value, it is still inadequate, difficult to synchronize, think about and apply to many cases and problems. Therefore, the transition from IAS to IFRS is inevitable when IFRS uses the principle of fair value in expressing liabilities, assets, businesses and organizations.
The transformation of IAS to national standards and vice versa becomes inadequate
3.2. Inadequacies when converting IAS to national accounting standards and vice versa
Although IAS is an old international standard, its scope of use is not much, and it is not considered a common accounting language of countries. Therefore, this forces businesses with branches, subsidiaries, and operations in many countries to have to convert their financial statements to IAS or vice versa for use. This is costly and wasteful for businesses and organizations.
Therefore, converting IAS to IFRS – a common language, saves resources and effort for many businesses and organizations operating today.
3.3. IFRS is the global trend to move from harmony to convergence
Before IFRS, people often talked about how to harmonize one country’s accounting standards with another. It shows that accounting standards are different and people in the Financial Accounting industry will try to make them as harmonized as possible.
Meanwhile, in the 21st century, countries are moving towards globalization, removing borders in many fields. The transformation of IAS to IFRS has become a global trend, turning harmonism into convergence, bringing national standards closer together and in the future converging into one point, sharing the same language.
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What is IFRS? Everything you need to know about this international accounting standard has been answered in this article. Hope this article has been of great help to you the preparation for the mandatory application of IFRS in Vietnam after 2025.