IFRS is an acronym that stands for International Financial Reporting Standards. This is a standardised way of reporting a business’s economic standing which makes it easier to understand and easier to compare between different companies. IFRS standards have been utilized by the European Union since 2002 as legal accounting requirements, as a way to keep reporting consistent across different member states. But what will happen after Brexit? Find out everything you need to know.
So, what is IFRS?
Company accountants will need to be familiar with the IFRS standards when it comes to reporting at the end of each accounting period. These are listed on the IFRS website, which publishes an annual consolidated standards list known as the Red Book. This is available both with in-depth descriptions for experts and with simplified descriptions that may be more accessible to small business owners or those who don’t work in accounting but want to become familiar with the key standards of reporting.
The IFRS standards provide guidance in relation to the conceptual framework for reporting: first-time adoption, payments, resources, assets, costs, exchange rates, employee benefits, leases, revenues, disclosures, financial instruments, and more. There is also the option to pay for a premium subscription, which gives you access to the IFRS’s accompanying documents.
GAAP vs. IFRS
GAAP stands for Generally Accepted Accounting Principles. This is a set of principles, standards and principles that are used by many companies to make sure their financial statements are compliant with local regulations. Generally Accepted Accounting Principles are used in the United States, while the International Financial Reporting Standards have been adopted in the European Union as well as in more than 144 countries worldwide. This is particularly useful for companies that operate internationally as it sets out common principles and standards that make accounts easier to compare and convert.
Will Brexit impact IFRS?
Because the IFRS has been adopted by the European Union, there will be an impact on UK companies once the nation’s new rules take effect. However, it’s not expected to have an immediate impact because the IFRS will be replaced, in the first instance, by UK-adopted international accounting standards, which will be identical to the existing IFRS. The main concern for businesses is that there could be changes made in the future that may impact the way financial reporting needs to be done, but this remains to be seen.
When does Brexit take effect?
While the UK has officially already withdrawn from the European Union, the country is currently in a transition period. This means that the new rules don’t come into play until 1 January 2021. Companies can continue to use EU-adopted financial standards like IFRS up until this date, after which they will need to switch to UK-adopted financial standards. However, as mentioned, these will be identical at first, so won’t have any practical impact in the initial stages, but it’s important to keep an eye on proceedings in case there are any changes throughout the next accounting cycle.
What does this mean for your business?
While IFRS standards may be the same come January, there is always the potential for big changes in the future. It’s important to watch out for any new regulations that are introduced, and which may be specific to the UK rather than being rolled out internationally. It’s also important to consider what this means for your business if you’re operating internationally. You may find that you have different rules to follow in different regions, and you’ll need to make sure your accounts departments are on top of the regulations in all the areas you operate in.
Where can you find out more information?
The gov.uk website sets out information for companies that have questions about accounting from 01 January 2021. As this is the official source of information in this regard, it’s important to check the page regularly and make sure your information is up to date.
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