IFRS, or International Financial Reporting Standards have received a lot of hype over the past few years. It is important that accountants, finance professionals, and investors all need to understand and learn the IFRS method, as its implementation has serious ramifications for financial reporting.
SEC Moving to International Standards
IFRS, or International Financial Reporting Standards, are the chosen accounting standard for many European, Asian, and Pacific countries. Currently, the SEC has made a push for American companies to report using IFRS instead of the customary US GAAP (United States Generally Accepted Accounting Principles). Such a transition would drastically affect the net income of American companies, as IFRS uses different methods of calculating certain expenses and liabilities that are subject to judgement (example: pension expenses).
Even if the SEC's push towards IFRS slows down or is not completed, American investors and financial and accounting professionals still need to have a basic knowledge of IFRS.
Why is it Important to Understand the IFRS?
Current investors and finance professionals need to understand IFRS because certain foreign companies traded on the US Stock markets report using IFRS instead of US GAAP. Unlike other foreign accounting standards, the SEC does not require a footnote reconciliation of IFRS Earnings to US GAAP earnings. This means that investors and financial professionals may have difficulties comparing the earnings and expenses of American companies to those of foreign companies reporting under US GAAP.
It is important that a savvy investor and any competent financial professional needs to understand the basic differences in US GAAP and IFRS in order to make informed decisions.
How Can I Learn the IFRS Method?
Learning about IFRS doesn't necessarily mean that you have to enroll in a college degree program for accounting. There are several online training resources available that are written in an easy-to-understand manner. All that is required to learn about IFRS is a basic understanding about accounting principles and certain financial concepts.
Deloitte, one of the big four accounting firms, has a wonderful set of IFRS training modules. Each of these modules are set up for the general public to use. Undergraduates and those with a basic understanding about financial matters will understand these modules. In order to get the most out of the modules, you should complete "Using IFRS e-learning" first, followed by "IAS 1: Presentation of Financial Statements." After that, you can complete the modules as you see fit.
In order to complete the modules, you will need to download the modules from the Deloitte Web site to your computer. This is excellent, as you will not require an internet connection to complete the modules once they are started.