Understanding IFRS
It is necessary for businesses to adhere to IFRS in their accounting, as these are based on the principles of comparability, relevance, clarity, reliability and various accounting rules.
Detailing how businesses should report their expenses, income and other transactions establishes a common accounting language, understood by auditors, global investors, government regulators and other parties. The standards aid users of financial statements in comparing financial performance of publicly listed companies irrespective of their location.
The European Union, parts of South America, Asia and over 100 countries globally use IFRS as the official standard of accounting. IFRS is different from the Generally Accepted Accounting Principles (GAAP), used in the United States, In that the IFRS framework is principle-based, allowing for more flexibility and room for interpretation. Read more at Harvard Business Insights.