To make the financial statement in the UK according to international accounting standards can only be done when they are endorsed. All EU-endorsed IFRs are also included in this. The endorsement status can be checked by the UK endorsement board as well. There is no chance that unendorsed standards are adopted in the UK. If there is no conflict found in the standards with the required interpretations, the early applied process will be accepted. The question that arises here is that what is IFRS and what exactly defines it?
Before we delve deep into further discussion, let’s have a look at the focused points of discussion. This includes the following:
- What is IFRS (International Financial Reporting Standards)?
- IFRS (International Financial Reporting Standards) that Is Adopted in The UK
- The Transition
- The Bottom Line
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What is IFRS (International Financial Reporting Standards)?
IFRS stands for International Financial Reporting Standards. There is a set of accounting rules for the financial statement that belong to public companies, is known by the name of IFRS. The main purpose of this accounting set of rules is to make the companies, transparent, consistent and easy to compare anywhere in the world.
Moreover, these rules are confirmed by International Accounting Standards Board. Several people who are associated with accounting still confuse IFRS with International Accounting Standards which was the old standard of IFRS and was updated in 2001.
Following is a list that depicts the goals to achieve while standards are designed:
- Consistency in accounting language
- Educated financial analysis
- The help of businessmen and investors
- Fine accounting practices and statement
- Sensible Business decisions
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IFRS (International Financial Reporting Standards) that Is Adopted in The UK:
On 31st January 2020, the EU was left by the UK officially. However, until the end of the transition period, the rules were followed in the UK. Which can be further defined, 11:00 PM in December on the 31st day. This is also called the implementation period and is written as IP.
All EU-endorsed IFRS are provided by the UK legislation that occurred on IP completion day or before that. They are known as the UK adopted IFRS. So this will not be wrong to say that EU-endorsed IFRS and UK adopted ones are just the same. However, after 31st December all the IFRS will need independent endorsement. Only then it will be possible for the UK companies to have an implementation these rules.
It is to be decided by the UK preparers that whether they will apply the UK endorsed standard of accounting rules or EU endorsed IFRS.
In case the accounting period starts after 1st January in the UK, the requirement is to switch to the UK endorsed IFRS.
For the cases that fall in the time period before 1st January 2021, there is little flexibility in terms of applying the accounting rules endorsed in the UK. This is specifically only allowed for the accounting period:
That has ended after the day of completion.
That started as well as ended before IP completion day. IP completion day refers to 11:00 Pm on 31st December as discussed above as well.
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The Bottom Line:
Now that you have developed a better understanding of what is IFRS, we can sum up the discussion by saying that the accounting standards can only be applied if the endorsement is done in the UK. We hope this article helps to provide fair enough information to make the right business choices.
Disclaimer: This article intends to provide general information based on what is IFRS and relevant details.