IFRS Advisory
Navigating International Financial Reporting Standards
In today’s global business landscape, organizations face the challenge of complying with complex financial reporting requirements. IFRS is a globally recognized set of accounting standards that govern how organizations report its financial information. IFRS advisory services provide valuable expertise and guidance to help organizations navigate these standards effectively.
Illustrating IFRS 9, 15, and 16: Real-World Examples
IFRS 9 – Financial Instruments
Example: IFRS 9, applicable to a trading company, involves categorizing financial assets, assessing credit risk, and calculating Expected Credit Loss (ECL). We classify assets, evaluate credit risk based on historical, current, and future data, and compute ECL by considering default probability, loss given default, exposure at default, and time value of money. ECL is then either recognized in profit/loss or as a loss allowance, and key assumptions are disclosed in our financial statements.
IFRS 15 – Revenue from Contracts with Customers
Example: A software company transitions to IFRS 15 to recognize revenue from its software licenses. It identifies performance obligations within customer contracts and allocates transaction prices to each obligation. Revenue is recognized when control of the software is transferred, which may be over time as the customer receives continuous updates and support, or at a specific point in time if the customer receives a one-time software installation.
IFRS 16 – Leases
Example: A retail chain implements IFRS 16 for its lease accounting. It identifies all lease agreements, including store rentals and equipment leases. Under IFRS 16, the company recognizes right-of-use assets and corresponding lease liabilities on its balance sheet. It calculates depreciation of these assets and interest on the lease liabilities, impacting both the income statement and balance sheet.
IFRS advisory services are essential for organizations operating in a global business environment. By providing expertise and guidance, these services assist organizations in understanding and complying with the complex requirements of IFRS. From implementation and transition to interpretation, financial reporting, and training, IFRS advisory services add value by ensuring accurate and reliable financial information and promoting transparency and trust. Engaging IFRS advisory services can help organizations navigate the complexities of IFRS and achieve compliance, credibility, and operational excellence.