IFRS Foundation

The IFRS Foundation is an independent, not-for-profit organization

responsible for developing and promoting the use of a single set of high-
quality, understandable, enforceable, and globally accepted accounting
standards—known as the International Financial Reporting Standards (IFRS).
Established in 2001, the foundation aims to bring transparency,
accountability, and efficiency to financial markets around the world. The
IFRS Foundation oversees the work of the International Accounting
Standards Board (IASB), which is responsible for developing and issuing IFRS
Standards. In addition, the foundation supports the International
Sustainability Standards Board (ISSB), which was established in 2021 to
create global standards for sustainability-related disclosures.

Governance of the IFRS Foundation is managed by a group of Trustees (22)

from diverse geographical and professional backgrounds. These Trustees
appoint IASB and ISSB members, ensure adequate funding, and monitor the
strategic direction of the organization. The foundation also encourages
stakeholder engagement through public consultations and outreach
programs. Headquartered in London, the IFRS Foundation works with
regulators, standard-setters, companies, investors, and professionals
worldwide. Its goal is to ensure that financial information is consistent,
comparable, and relevant, facilitating better economic decision-making and
enhancing investor confidence globally.
Functions of the IFRS Foundation
The major functions of the IFRS Foundation include the following:

1. Developing IFRS Standards :

The IFRS Foundation, through the International Accounting Standards

Board (IASB), develops and issues high-quality International Financial
Reporting Standards (IFRS) that bring transparency, accountability,
and efficiency to financial reporting.

2. Developing Sustainability Disclosure Standards:

Through the International Sustainability Standards Board (ISSB), the

foundation develops global baseline sustainability disclosure standards
to provide consistent and comparable ESG (Environmental, Social, and
Governance) reporting.

3. Promoting Global Adoption

It promotes the adoption and consistent application of IFRS Standards

around the world to achieve global accounting harmonization.

4. Ensuring Stakeholder Engagement:

The foundation conducts public consultations, outreach, and

stakeholder engagement to ensure that the standards reflect a wide
range of perspectives and are practical for global use.

5. Monitoring Implementation and Compliance:

It supports consistent interpretation and application of the standards

by issuing guidance, educational materials, and facilitating global
discussions.

6. Governance and Oversight:

The IFRS Foundation's Trustees oversee the functioning of the IASB

and ISSB, ensuring transparency, accountability, and adherence to due
process.
 7. Capacity Building and Education:

The foundation provides training, resources, and materials to support

preparers, auditors, and users in applying IFRS standards effectively.

These functions collectively aim to enhance the quality, comparability, and

reliability of financial and sustainability reporting globally.

Standard Setting Structures of IFRS

The standard-setting structure internationally is composed of the following
four organizations:

1. The IFRS Foundation provides oversight to the IASB, IFRS Advisory

Council, and IFRS Interpretations Committee. In this role, it appoints
members, reviews effectiveness, and helps in the fundraising efforts for these
organizations.

2. The International Accounting Standards Board (IASB) develops, in the

public interest, a single set of high-quality, enforceable, and global
international financial reporting standards for general-purpose financial
statements.

3. The IFRS Advisory Council (the Advisory Council) provides advice and
counsel to the IASB on major policies and technical issues.

4. The IFRS Interpretations Committee assists the IASB through the timely
identification, discussion, and resolution of financial reporting issues within
the framework of IFRS.

Objectives of International Accounting Standard Board (IASB)

The International Accounting Standards Board (IASB) is an independent
standard-setting body responsible for developing and promoting high-
quality international financial reporting standards (IFRS). Its core objectives
are:

 Develop High-Quality Financial Reporting Standards:

The IASB aims to develop a single set of high-quality, understandable,

enforceable, and globally accepted accounting standards (IFRS) to improve
the transparency and comparability of financial statements.
  Promote the Use and Rigorous Application of IFRS:

The IASB encourages global adoption and consistent application of IFRS to

enhance the credibility and integrity of financial reporting worldwide.

 Protect and Serve the Public Interest:

The IASB works to provide investors and other users of financial statements
with transparent and comparable information, supporting sound economic
decision-making.

 Maintain Convergence with National Standards:

The IASB cooperates with national standard setters to align IFRS with
existing national accounting standards, aiming for convergence and reducing
differences globally.

 Engage in Stakeholder Consultation:

The IASB operates through a transparent and inclusive due process, engaging
with a broad range of stakeholders, including regulators, investors, auditors,
and preparers of financial statements.

 Improve the Quality of Financial Reporting in Developing and

Emerging Economies:

The IASB provides support and resources to help developing countries

implement and benefit from IFRS adoption.
Steps of Setting of IFRS by IASB
The overall agenda of the IASB is initially set by discussion with the IFRS
Advisory Council. The process for developing an individual standard
involves the following steps.

Step 1

During the early stages of a project, IASB may establish an Advisory

Committee or working group to give advice on issues arising in the project.
Consultation with the Advisory Committee and the Advisory Council occurs
throughout the project.

Step 2

IASB may develop and publish a Discussion Paper for public comment.

Step 3

Following the receipt and review of comments, IASB would develop and
publish an Exposure Draft for public comment.

Step 4

Following the receipt and review of comments, the IASB would issue a final
International Financial Reporting Standard.

The period of exposure for public comment is normally 120 days. However,
in some circumstances, proposals may be issued with a comment period of
not less than 30 days. Draft IFRS Interpretations are exposed for a 60-day
comment period.
 List of IFRS Standards

IFRS Title Purpose

No.
IFRS 1 First-time Adoption of Guidance for entities adopting IFRS
International Financial for the first time.
Reporting Standards
IFRS 2 Share-based Payment Accounting for transactions in which
an entity receives goods or services
in exchange for equity instruments.
IFRS 3 Business Combinations Accounting for mergers and
acquisitions.
IFRS 4 Insurance Contracts Temporary guidance on insurance
contracts (being replaced by IFRS
17).
IFRS 5 Non-current Assets Held Classification, measurement, and
for Sale and Discontinued presentation of assets held for sale.
Operations
IFRS 6 Exploration for and Accounting for exploration and
Evaluation of Mineral evaluation expenditures in extractive
Resources industries.
IFRS 7 Financial Instruments: Disclosure requirements for financial
Disclosures instruments.
IFRS 8 Operating Segments Requirements for segment reporting.
IFRS 9 Financial Instruments Classification, measurement, and
impairment of financial instruments.
IFRS 10 Consolidated Financial Principles for presenting
Statements consolidated financial statements.
IFRS 11 Joint Arrangements Accounting for joint ventures and
joint operations.
IFRS 12 Disclosure of Interests in Disclosure requirements for
Other Entities subsidiaries, associates, joint
arrangements, and structured
 entities.
IFRS 13 Fair Value Measurement Defines fair value and provides a
framework for measuring it.
IFRS 14 Regulatory Deferral Allows certain rate-regulated entities
Accounts (temporary to continue using previous
standard) accounting practices.
IFRS 15 Revenue from Contracts Comprehensive framework for
with Customers revenue recognition.
IFRS 16 Leases Introduces a single lessee accounting
model.
IFRS 17 Insurance Contracts Comprehensive standard for
insurance contracts (effective from
2023).

List of IAS Standards Still in Use

IAS Title Purpose

No.
IAS 1 Presentation of Financial Provides guidelines on structure
Statements and content of financial
statements.
IAS 2 Inventories Prescribes the accounting
treatment for inventories.
IAS 7 Statement of Cash Flows Requires the presentation of
cash flow information.
IAS 8 Accounting Policies, Changes Sets rules for selecting and
in Accounting Estimates and changing accounting policies.
Errors
IAS 10 Events after the Reporting Deals with adjusting and non-
Period adjusting events after the
 reporting period.
IAS 12 Income Taxes Accounting for current and
deferred tax.
IAS 16 Property, Plant and Recognition and measurement
Equipment of fixed assets.
IAS 19 Employee Benefits Covers all forms of employee
compensation.
IAS 20 Accounting for Government Deals with accounting for public
Grants and Disclosure of sector support.
Government Assistance
IAS 21 The Effects of Changes in Deals with foreign currency
Foreign Exchange Rates translation.
IAS 23 Borrowing Costs Capitalization of interest on
qualifying assets.
IAS 24 Related Party Disclosures Requires disclosure of related
party relationships and
transactions.
IAS 26 Accounting and Reporting by Accounting by pension and
Retirement Benefit Plans retirement funds.
IAS 27 Separate Financial Statements Accounting for investments in
subsidiaries, jointly controlled
entities, etc.
IAS 28 Investments in Associates and Equity method for accounting
Joint Ventures for associates and joint ventures.
IAS 29 Financial Reporting in Adjustments required for
Hyperinflationary Economies hyperinflation.
IAS 32 Financial Instruments: Classification of financial
Presentation instruments as debt or equity.
IAS 33 Earnings per Share Calculation and presentation of
EPS.
IAS 34 Interim Financial Reporting Minimum content and principles
for interim reporting.
IAS 36 Impairment of Assets Procedures for ensuring assets
 are not carried above
recoverable amounts.
IAS 37 Provisions, Contingent Recognition and measurement
Liabilities and Contingent of provisions and contingencies.
Assets
IAS 38 Intangible Assets Accounting for non-physical
assets like patents and
trademarks.
IAS 40 Investment Property Treatment of land and buildings
held for investment.
IAS 41 Agriculture Biological assets and agricultural
produce.
Replaced/Withdrawn IAS Standards: IAS 3, 4, 5, 6, 9, 15, 22, 25, 30, and
35. These have been withdrawn or replaced by newer IFRS standards.

Types of Pronouncements by IASB

The IASB issues three major types of pronouncements:

1. International Financial Reporting Standards.

Financial accounting standards issued by the IASB are referred to as
International Financial Reporting Standards (IFRS). The IASB has
issued 17 of these standards to date, covering such subjects as
business combinations, share-based payments, and leases. Prior to
the IASB (formed in 2001), standard-setting on the international
level was done by the International Accounting Standards
Committee, which issued International Accounting Standards (IAS).
The committee issued 41 IASs, many of which have been amended
or superseded by the IASB. Those still remaining are considered
under the umbrella of IFRS.

2. Conceptual Framework for Financial Reporting.

This Conceptual Framework for Financial Reporting sets forth the

fundamental objective and concepts that the Board uses in
developing future standards of financial reporting. The intent of
the document is to form a cohesive set of interrelated concepts—a
conceptual framework—that will serve as tools for solving existing
and emerging problems in a consistent manner. For example, the
objective of general-purpose financial reporting discussed earlier is
part of this Conceptual Framework. The Conceptual Framework
and any changes to it pass through the same due process
(preliminary views, public hearing, exposure draft, etc.) as an IFRS.
However, this Conceptual Framework is not an IFRS and hence
does not define standards for any particular measurement or
disclosure issue. Nothing in this Conceptual Framework overrides
any specific international accounting standard.

3. International Financial Reporting Standards Interpretations.

Interpretations issued by the IFRS Interpretations Committee are
also considered authoritative and must be followed. These
interpretations cover (1) newly identified financial reporting issues
not specifically dealt with in IFRS and (2) issues where
unsatisfactory or conflicting interpretations have developed, or
seem likely to develop, in the absence of authoritative guidance.
The IFRS Interpretations Committee has issued over 20 of these
interpretations to date. In keeping with the IASB’s own approach
to setting standards, the IFRS Interpretations Committee applies a
principles-based approach in providing interpretative guidance. To
this end, the IFRS Interpretations Committee looks first to the
Conceptual Framework as the foundation for formulating a
consensus. It then looks to the principles articulated in the
applicable standard, if any, to develop its interpretative guidance
and to determine that the proposed guidance does not conflict
with provisions in IFRS.

Hierarchy of IFRS

Because it is a private organization, the IASB has no regulatory

mandate and therefore no enforcement mechanism. As a result,
the Board relies on other regulators to enforce the use of its
standards. For example, the European Union requires publicly
traded member country companies to use IFRS.
Any company indicating that it is preparing its financial statements
in conformity with IFRS must use all of the standards and
interpretations. The following hierarchy is used to determine what
recognition, valuation, and disclosure requirements should be
used. Companies first look to:
1. International Financial Reporting Standards, International
Accounting Standards (issued by the predecessor to the IASB),
and IFRS interpretations originated by the IFRS
 Interpretations Committee (and its predecessor, the IAS
Interpretations Committee);
2. The Conceptual Framework for Financial Reporting; and
3. Pronouncements of other standard-setting bodies that use a
similar conceptual framework (e.g., U.S. GAAP).
In the absence of a standard or an interpretation in item 1 above,
companies look to the Conceptual Framework for Financial
Reporting and then to most recent pronouncements of other
standard-setting bodies that use a similar conceptual framework to
develop accounting standards (or other accounting literature and
accepted industry practices to the extent they do not conflict with
the above). The overriding requirement of IFRS is that the financial
statements provide a fair presentation (often referred to as a “true
and fair view”).

Comparative discussion among GAAP, IAS, and IFRS.

General Accepted Accounting Principles (GAAP), International
Accounting Standards (IAS), and International Financial Reporting
Standards (IFRS) are three accounting frameworks used globally to
guide financial reporting. While they share similar goals—ensuring
transparency, consistency, and reliability—they differ in origin,
structure, and application.
1. Origin and Regulatory Bodies:
- GAAP is mainly used in the United States and is governed by the
Financial Accounting Standards Board (FASB). It consists of rules
and standards tailored for U.S. businesses.
- IAS was issued by the International Accounting Standards
Committee (IASC) between 1973 and 2001. These were the first
globally accepted accounting standards.
- IFRS succeeded IAS and is issued by the International Accounting
Standards Board (IASB), established in 2001. IFRS continues to
evolve and replace older IAS.

2. Approach:
- GAAP follows a rules-based approach, which means it provides
detailed guidance for specific scenarios, making it more rigid.
- IAS and IFRS follow a principles-based approach, focusing on
broader guidelines, professional judgment, and transparency,
allowing flexibility in application.
Global Application:
- GAAP is limited to the U.S., although some other countries
follow similar frameworks.

- IAS was adopted in many countries before IFRS replaced it. Many
IAS standards are still in force under the IFRS umbrella.
- IFRS is used in over 140 countries including the EU, Australia, and
parts of Asia and Africa, making it the most widely adopted
standard.

4. Presentation and Reporting Differences:

- Under GAAP, items like inventory (LIFO method) and

development costs are treated differently than under IFRS.

- IFRS does not permit LIFO and requires capitalization of

development costs under specific conditions, which GAAP often
expenses.

5. Relevance:
- IAS serves as the foundation of IFRS, with many standards still
active.

- IFRS is now the global benchmark for transparent and

comparable financial reporting.
- GAAP remains critical for U.S.-listed companies but is increasingly
pressured to converge with IFRS.

While GAAP, IAS, and IFRS aim to maintain reliable financial

reporting, IFRS—with its global focus and principles-based
structure—is increasingly becoming the international norm,
offering greater comparability across borders.