International Financial Reporting Standards

The International Financial Reporting Standards (IFRS), also known by its acronym in English as IFRS (International Financial Reporting Standards), are accounting technical standards adopted by the IASB, a private institution based in London. They constitute the International Standards or international norms in the development of the accounting activity and represent an accounting manual in the form in which it is acceptable in the world.

The standards are known by the acronyms IAS and IFRS depending on when they were approved and are qualified through the "interpretations" which are known by the acronyms SIC and IFRIC.

Accounting standards issued between 1973 and 2001 are known as "International Accounting Standards" (IAS) and were issued by the International Accounting Standards Committee (IASC), precedent of the current International Accounting Standards Board (IASB). Since April 2001, the year the IASB was established, this body has adopted all IAS and continued to develop it, calling the new standards "International Financial Reporting Standards" (IFRS). The IFRS - IFRS in the financial statements are unaware of the social and environmental impacts caused by organizations.

International adoption of IFRS

IFRS are used in many parts of the world, including the European Union, Hong Kong, Australia, Ireland, Chile, Colombia, Malaysia, Pakistan, India, Panama, Guatemala, Peru, Russia, South Africa, Singapore, Turkey, Ecuador, Costa Rica, Nicaragua and El Salvador. Since March 28, 2008, around 75 countries mandate the use of IFRS, or part of them. Many other countries have decided to adopt the standards in the future, either through their direct application or through their adaptation in the national legislations of the different countries.

Since 2002 there has also been a rapprochement between the IASB International Accounting Standards Board and the FASB Financial Accounting Standards Board, the entity in charge of drawing up accounting standards in the United States, to try to harmonize international standards with North American ones. In the United States, publicly traded entities will have the possibility of choosing whether to present their financial statements under US GAAP (the national standard) or under IAS.

IFRS have been officially adopted by the European Union as its accounting standards, but only after going through the EFRAG review, so to check which ones are applicable you have to check their official status.

IFRIC 1 Changes in existing decommissioning, restoration and similar liabilities

IFRIC 2 Contributions from members of cooperative entities and similar instruments

IFRIC 4 Determining Whether an Arrangement Contains a Lease

IFRIC 5 Rights for participation in funds for decommissioning, restoration and environmental rehabilitation

IFRIC 6 Obligations Arising from Participation in Specific Markets — Waste Electrical and Electronic Equipment

IFRIC 7 Application of the restatement procedure according to IAS 29 Financial information in hyperinflationary economies

IFRIC 8 Scope of IFRS 2

IFRIC 9 Reassessment of embedded derivatives

IFRIC 10 Interim Financial Information and Impairment

IFRS 11 IFRS 2 — Transactions with own and group shares

IFRS 12 Service Concession Agreements

IFRS 17 Distribution of Non-Monetary Assets to Shareholders

SIC-7

Introduction of the euro SIC-10

Public Aid — Not specifically related to exploitation activities SIC-12

Consolidation — Special Purpose Entities SIC-13

Jointly Controlled Entities — Non-Monetary Contributions by Unitholders SIC-15

Operating leases — Incentives SIC-21

Income Tax — Recovery of Revalued Non-Depreciable Assets SIC-25

Income tax — Changes in the tax status of the entity or its shareholders SIC-27

Evaluation of the substance of transactions that take the legal form of a lease SIC-29

Disclosure — Service concession agreements SIC-31

Revenue — Trade-ins involving advertising services SIC-32

Intangible assets — Website costs

International Public Sector Accounting Standards (IPSAS)

The International Public Sector Accounting Standards (IPSAS) are developed by the International Public Sector Accounting Standards Board (IPSASB). [2] IPSASs establish the requirements for financial reporting by governments and other public sector entities.

IFRS for Small and Medium-Sized Enterprises (SMEs)

In July 2009, the IASB published the version of the International Financial Reporting Standards for Small and Medium-sized Enterprises (IFRS for SMEs). The IFRS for SMEs are a simplified version of the IFRS, made up of 35 sections, where it deals with issues focused on SMEs. The 5 characteristics of this simplification are:

• Some topics in IFRS-Totals are omitted, as they are not relevant to the typical PyMes.
• Some alternatives to accounting policies in IFRS-Totales are not allowed, as a simple methodology is available for PyMes.
• Simplification of many principles of recognition and measurement of those in IFRS-Totals.
• Substantially less revelations.
• Simplification of Exhibition of Reasons with the other changes.

Legal Framework

The legal framework for the preparation of financial statements establishes the basic principles for IFRS, although the IFRS legal framework does not exist as such. The conceptual framework establishes the objectives of financial statements and provides information about the financial position, performance and changes in financial position of the entity that is useful for a wide range of users to make decisions.

Elements of Financial Statements

The framework that establishes the Statements of Financial Position (Balance), includes:

• Assets: Company-controlled resource as a result of past events that are expected to gain future economic benefits.
• Liabilities: Current obligation of the company, arising from past events, to the maturity of which, and for which the company expects to be detached from resources that incorporate economic benefits.
• Net heritage: It is the residual part of the assets of the company, once deducted all its liabilities.
• Income: Increases in economic benefits by receiving or increasing assets or decreasing liabilities.
• Expenditure: Decrease in economic goods by services and goods obtained or purchased.

Content of the Financial Statements

The Financial Statements under IFRS regulations include:

• The State of State of State of State of State of State of State of State of State of State of State of State
• The State of Results ("Country of losses and profits")
• State of evolution of net assets and State of Integral Results
• The Cash Flow State ("State of Origin and Application of Funds")
• Explanatory notes or memory, including a summary of significant accounting policies.

The financial statements must be presented together, so a partial public presentation is not admissible. To present results there is an internal version (NIC 34), which allows reducing and simplifying its content.

Property, Plants and equipment

Property, plant and equipment are initially measured at cost. This may include costs directly attributed to acquisition, construction or production if the entity chooses to adopt a consistent policy.

Property, plant and equipment may be revalued at fair value if all assets of its class are treated in this way (for example, the revaluation of all our properties) (IAS 16.31 and 36). Gains from revaluations are directly adjusted against equity, not in the income statement; value losses are recognized as losses in the income statement (IAS 16.39 and 40).

Depreciation is charged for the cost or value of the asset throughout its estimated useful life up to the recoverable amount (IAS 16.50). The cost of depreciation is recognized as an expense in the income statement, unless it is included in the book value of another asset. (IAS 16.47). Depreciation of Property Plant and equipment used for development activities may be included in the cost of an intangible asset recognized in accordance with IAS 38 Intangible Assets (IAS 16.49). The depreciation method and the recoverable value must be reviewed annually (IAS 16.61). In most cases the 'straight-line' method, with the same depreciation charge from the date an asset is put into use until it is expected to be sold or no further profit is realized of it, but also other depreciation methods are used if the assets are used proportionately more in some periods than others (IAS 16.56).

Inventories

Inventory is valued at the lower of cost and net realizable value (IAS 2.9), similarly to the lower of cost or market value, used with Generally Accepted Accounting Principles.

Cost comprises all acquisition expenses, conversion costs and other costs incurred in leaving the products in their location and condition (IAS 2.10). In case individual products are not identifiable, first in, first out (FIFO) will be the method used, so that the book cost represents the most recently purchased items. The last in, first out (LIFO) method is not accepted (IAS 2.25).

Net realizable value is the estimated sales price less costs to complete the costs of sale (IAS 2.6).