international financial reporting standards (IFRS)
International Financial Reporting Standards
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What are financial reporting standards in Mexico?
The Financial Reporting Standards (NIF) in Mexico are a set of regulations issued by the Mexican Council for Research and Development of Financial Reporting Standards (CINIF). These standards regulate the information contained in financial statements and are widely accepted by various institutions, being widely used by users of financial information in the country.
The application of these standards is essential to provide theoretical support and establish clear criteria on how financial information should be presented in financial statements. This guarantees the comparability, transparency and reliability of the information for users.
NIFs cover different aspects and classifications, ranging from A to E, and are updated periodically to reflect changes in the economic, legal and financial environment. They arise in response to the needs of users of financial information and changing market conditions, ensuring that accounting information is relevant and useful for decision making.
What Is the Classification of Financial Reporting Standards?
Financial Reporting Standards (FRS) are classified into five main categories, designated A to E, depending on the area of application:
- Conceptual framework and structure of standards: This classification addresses the conceptual framework of accounting, the basic postulates and the way in which financial statements are prepared.
- Standards applicable to financial statements: Refers to the application of NIF in the preparation of financial statements, including the cash flow statement, the income statement, the statement of financial position (balance sheet), among others.
- Standards applicable to specific concepts in financial statements: This category focuses on specific aspects within the financial statements, such as accounts receivable, investments, inventories, tangible assets, advance payments, among others.
- Rules applicable to problems determining results: Specific problems related to the determination of financial results are addressed here, such as leases, recognition of revenue from contracts with customers, employee benefits, among others.
- Rules applicable to specialized activities in different sectors: This classification focuses on specialized activities, both for-profit and non-profit, such as gifts received or gifts given.
These standards are supported by major international institutions and provide a solid framework for accounting practice, ensuring uniformity, transparency and reliability of financial information. Its proper application helps organizations and entities understand their financial situation and make informed decisions.
What Are International Financial Reporting Standards? (IFRS)
International Financial Reporting Standards (IFRS), also known as IFRS (International Financial Reporting Standards), are a set of regulations established by the International Accounting Standards Board (IASB), with the objective of creating a homogeneous basis for the presentation of financial information and financial statements at a global level.
IFRS covers a wide range of accounting aspects, including:
- Presentation of financial statements: They establish the requirements for the presentation and structure of financial statements, ensuring that the information is clear, understandable and comparable.
- Valuation of assets and liabilities: They establish principles and methodologies for the valuation of assets and liabilities, including criteria for initial and subsequent measurement and for the evaluation of impairment.
- Accounting and recording of income and expenses: They establish the principles for the recognition and accounting of income and expenses in the financial statements, ensuring the adequate representation of economic transactions.
These standards are adopted by countries and entities around the world in order to improve the transparency, comparability and quality of financial information, facilitating decision-making for investors, lenders and other users of financial information.
What are IFRS for?
International Financial Reporting Standards (IFRS) have several fundamental purposes:
- Transparency of financial information: IFRS establishes clear and consistent criteria for the presentation of financial information, allowing users to easily understand the financial position and performance of an entity.
- Improved comparability: By following common accounting standards around the world, IFRS facilitates the comparison of financial statements between different entities and countries. This helps users evaluate and compare the financial performance of different companies more effectively.
- Informed decision making: By providing more transparent and comparable financial information, IFRS enables users, such as investors, lenders and financial analysts, to make more informed and informed decisions.
- Knowledge of the financial situation: The application of IFRS in a company provides a clear and accurate picture of its financial position, performance and cash flow. This helps managers and owners make strategic decisions and effectively manage the company's financial resources.
- Credibility and attractiveness for investors: By adopting recognized international standards, a company improves its credibility and attractiveness to potential investors. The application of IFRS can help build trust in the company and demonstrate its commitment to transparency and quality of financial information.
IFRS Standards
There are 4 sections that make up the IFRS:
- International Financial Reporting Standards (IFRS): These standards are issued by the International Accounting Standards Board (IASB) and are designed to be applied in the preparation and presentation of financial statements of for-profit entities. IFRS includes standards such as IFRS 9 on financial instruments, IFRS 15 on revenue from contracts with customers and IFRS 16 on leases, among others.
- International Accounting Standards (IAS): These standards were issued by the International Accounting Standards Board (IASC) before the creation of the IASB. Although some IAS have been replaced by IFRS, many remain relevant and applicable. They cover a wide range of accounting topics, including financial statement presentation, inventory accounting, lease accounting, and cost accounting, among others.
- IFRS Interpretation Committee (FINICI): This committee provides guidance on the application of IFRS and resolves issues of interpretation that arise in practice. Their interpretations, known as IFRIC, clarify the application of IFRS in specific situations and help ensure uniform application of accounting standards around the world.
- Standing Interpretations Committee (SIC): This committee issued interpretations on accounting standards issued by the IASC. Although it no longer issues new interpretations, its previous interpretations remain relevant in many cases and provide guidance on specific accounting issues.
Together, these four sections form a comprehensive framework of accounting standards and guidance that are applied worldwide to ensure the consistency and quality of financial information presented by entities.
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