International Financial Reporting Standards (IFRS) are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are the rules to be followed by accountants to maintain books of accounts which are comparable, understandable, reliable and relevant as per the users internal or external.
Fundamental qualitative characteristics of financial information include:
- Faithful representation
Enhancing qualitative characteristics include:
The elements directly related to the measurement of the statement of financial position include:
- Asset: An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.
- Liability: A liability is a present obligation of the entity arising from the past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits, i.e. assets.
- Equity: Nominal equity is the nominal residual interest in the nominal assets of the entity after deducting all its liabilities in nominal value.
The financial performance of an entity is presented in the statement of comprehensive income, which consists of the income statement (Statement of Profit/Loss) and the statement of other comprehensive income (usually presented in two separate statements). Financial performance includes the following elements (which are recognized in the income statement or other comprehensive income as required by the applicable IFRS standard):
- Revenues: increases in economic benefit during an accounting period in the form of inflows or enhancements of assets, or decrease of liabilities that result in increases in equity.
- Expenses: decreases in economic benefits during an accounting period in the form of outflows, or depletions of assets or incurrences of liabilities that result in decreases in equity.