International Financial Reporting Standards (IFRS) are a set of accounting guidelines developed by the International Accounting Standards Board (IASB) to standardise financial reporting across the globe. IFRS enables companies to maintain transparency, consistency, and comparability in their financial statements, making it easier for investors, regulators, and stakeholders to assess business performance. Businesses in India adopting IFRS can also evaluate financing options like a business loan to support expansion or operational requirements. You can also check your business loan eligibility to understand how financing can align with IFRS-driven financial planning.
What are International Financial Reporting Standards (IFRS)?
IFRS are accounting standards that provide a common language for financial reporting worldwide. They define how transactions and events should be recognised, measured, presented, and disclosed in financial statements. The adoption of IFRS ensures that financial information is reliable, understandable, and comparable across different countries, supporting global investment decisions.
Core objectives and global importance of IFRS
The main objectives of IFRS include:
- Standardising financial reporting globally
- Enhancing transparency and comparability of financial statements
- Providing reliable and decision-useful information to investors and stakeholders
- Facilitating cross-border capital flow and investment decisions
- Reducing costs for multinational corporations by using a single reporting framework
Components of financial statements under IFRS
Financial statements under IFRS include several key components:
- Statement of Financial Position (Balance Sheet): Reports assets, liabilities, and equity
- Statement of Profit or Loss and Other Comprehensive Income: Shows income, expenses, and overall performance
- Statement of Changes in Equity: Tracks changes in shareholders’ equity
- Statement of Cash Flows: Details cash inflows and outflows from operations, investing, and financing
- Notes to Financial Statements: Provide additional explanations and disclosures
List of International Financial Reporting Standards (IFRS)
| IFRS standard | Description |
|---|---|
| IFRS 1 | First-time Adoption of IFRS |
| IFRS 2 | Share-based Payment |
| IFRS 3 | Business Combinations |
| IFRS 4 | Insurance Contracts |
| IFRS 5 | Non-current Assets Held for Sale and Discontinued Operations |
| IFRS 6 | Exploration for and Evaluation of Mineral Resources |
| IFRS 7 | Financial Instruments: Disclosures |
| IFRS 8 | Operating Segments |
| IFRS 9 | Financial Instruments |
| IFRS 10 | Consolidated Financial Statements |
| IFRS 11 | Joint Arrangements |
| IFRS 12 | Disclosure of Interests in Other Entities |
| IFRS 13 | Fair Value Measurement |
| IFRS 15 | Revenue from Contracts with Customers |
| IFRS 16 | Leases |
This standardisation helps businesses in India present financial statements that are understandable for investors and banks, which can influence eligibility for a business loan.
IFRS vs. Indian accounting standards
| Aspect | IFRS | Indian Accounting Standards (Ind AS) |
|---|---|---|
| Objective | Global standardisation | National compliance |
| Regulatory authority | IASB | Ministry of Corporate Affairs (MCA) |
| Adoption | Over 140 countries globally | India (mandatory for listed and large companies) |
| Measurement | Fair value and historical cost | Mainly historical cost, some fair value elements |
| Disclosure | Extensive and detailed | Moderate, aligned with IFRS |
How IFRS impacts key Indian sectors?
IFRS adoption affects sectors differently:
- Banking and Financial Services: Improved transparency in loan portfolios and asset valuation
- Manufacturing: Better inventory valuation and depreciation reporting
- Real Estate: Standardised revenue recognition for property sales
- Insurance: Clearer reporting of premiums, claims, and reserves
- IT and Services: Accurate reporting of long-term contracts and revenue
Conclusion
Adopting IFRS ensures consistent, transparent, and globally comparable financial reporting, which benefits investors, regulators, and businesses alike. For Indian companies, IFRS facilitates better decision-making and can positively influence funding opportunities, such as a business loan. Evaluating the business loan interest rate and using a business loan eligibility calculator helps businesses make informed financial choices while aligning reporting with international standards. Always check your pre-approved business loan offer before finalising financial strategies to support growth effectively.
