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At Pacific Business Consulting, we show how enterprises can adopt IFRS by using Microsoft Dynamics, and also provide IFRS consultation services.
The International Financial Reporting Standards (IFRS) are standards and interpretations adopted by the International Accounting Standards Board (IASB) and used in more than a hundred countries around the world. IFRS consist of a basic framework, 38 financial standards and 27 interpretations.
In August 2007, the Accounting Standards Board of Japan (ASBJ) and the IASB jointly announced an agreement (“Tokyo Agreement”) to accelerate convergence between Japanese GAAP and IFRS by the end of June 2011. Voluntary IFRS adoption is now allowed in Japan, and in 2012, a decision will be made on whether to impose compulsory adoption of IFRS starting 2015 or 2016. It is expected that compulsory adoption will be imposed.
| Official Name | International Financial Reporting Standards (IFRS) |
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| Standard-setter | International Accounting Standards Board (IASB) |
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| Interpretations Committee | International Financial Reporting Interpretations Committee (IFRIC) |
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IASB (9 items)
IFRS 1 First-time Adoption of International Financial Reporting Standards |
IASC (29 items)
IAS 1 Presentation of Financial Statements |
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IFRIC (16 items)
IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities |
SIC (15 items)
SIC7 Introduction of Euro |
The principal objective of IFRS is to create a single set of a global accounting standards that is able to produce more transparent, globally comparable, understandable and acceptable financial reporting for general purpose financial statements. IFRS include the following three features.
IFRS adoption enables investors to make more efficient investment decisions. On the other hand, companies can employ diversified financing methods and enjoy improved research on M&A activities.
| J-GAAP is rules-based and has detailed numerical criteria to deal with all scenarios. On the other hand, IFRS are more principles-based. Companies need to decide appropriate account processing based on the principles. |
IFRS put an emphasis on assets and liabilities. Comprehensive Income is defined as the change in a firm's net assets (assets minus liabilities) from non-owner sources. This is known as the Asset-Liability approach. On the other hand, J-GAAP is based on revenues-expenses perspectives. Current income is highly valued in business valuation. |
| The IFRS state that companies should introduce measurements of assets and liabilities at fair value and balance sheets should report the economic reality of companies. (by consolidating 100% of subsidiaries' income for instance). J-GAAP values income but measurements would be changed from acquisition cost basis to fair value basis with introduction of the Asset-Liability approach. |
IFRS place a priority on providing useful information for investors by evaluating companies externally. Due to the principles-based standards, executive managers will have more accountability. |
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The following diagrams depict matrices of examination items for IFRS. In an IFRS adoption project, account processing policies, operation, IT and organization are the main items for consideration.
Rather than an institutional point of view, a comprehensive approach to reviewing systems is required.
IFRS do not apply all companies. They are basically the standards for listed companies. In order to adopt IFRS, companies need to organize internals system to control the standards.
In Japan, IFRS will be applied only to consolidated financial statements, and individual financial statements should be prepared with J-GAAP. However, enterprises which do not prepare consolidated financial statements will have to disclose IFRS individual financial statements.