IFRS: advantages and features of their implementation
International Financial Reporting Standards (IFRS) are a constantly updated set of requirements and principles that unify generally accepted accounting and financial reporting rules used by various companies around the world. The need for such a transition lies in the ability to make the work of the companies themselves better and more transparent, determining in the future their integration into the level of international relations. At the same time, conducted accounting with a clear specification of the balance of companies is a prerequisite for further transition.
The decision to continue and follow the standards of IFRS in Kazakhstan is due to the ability to provide adequate financial results of their work to foreign business owners, as well as to interested investors. If one company provides financial statements on a cash basis, and the second on an income accrual basis, the figures themselves will be incomparable, and it is impossible to determine who exactly is doing better. Financial statements in accordance with IFRS make it possible to resolve the issue of further investment, and also testify to the transparency and reliability of the companies themselves.
The main features of the implementation of IFRS
International Financial Reporting Standards is a clear set of requirements and rules for conducting financial and economic activities of companies, which ensures the provision of truthful and coherent information. Thanks to this approach, the companies of Kazakhstan are able not only to interest foreign investors, but also prepare the way to enter international markets.
Only a trained and experienced professional can determine the kind of standards that a company’s work should meet in each individual case. Meanwhile, the fact is also taken into account that international auditing standards, management accounting and the preparation of financial results for each of the enterprises is an additional component of the general state policy aimed at shaping and further developing a market economy in Kazakhstan. The following should be highlighted among the existing and recommended requirements:
- IFRS Fixed Assets;
- income taxes;
- Interim financial statements;
- Flow of funds;
- Investment property.
The help of professionals in this case concerns not only the solution of technical issues related to the training of specialists and the introduction of appropriate software, but also the introduction of new financial indicators, which may differ and not only for the better.
The problem of transition to IFRS and ISA
One of the main obstacles to the introduction of accounting criteria per IFRS on the territory of Kazakhstan is the divergence of international requirements from the applicable national laws. Only well trained specialists who are well versed in all the nuances and can foresee the risks of all decisions are able to correctly resolve this issue. An equally serious problem concerns the lack of a clear translation of IFRS requirements into the state language, which is why most calculations and indicators require additional clarification and clarifying details. At the same time, all necessary adjustments are taken into account, as a rule, with a great delay and increased costs of labor resources.
The second important point concerns the priority of the economic content of the event over its legal support. If we consider the comparison of IFRS Kazakhstan in practice, then the tax inspection requires documentary confirmation of the operation, when, according to international requirements, the event in question is in itself and its rate may differ from the legal content. For a professional, the process of translating accounting according to IFRS standards has much more nuances and issues, and that is why this decision is important to first weigh and adequately assess the company’s individual capabilities.
It is logical that compliance with international requirements will allow local companies to become more actively involved in the international capital market, as well as to obtain opportunities for cooperation with foreign partners. However, there are still problems:
- inconsistencies of such requirements with the traditions and national peculiarities of Kazakhstan;
- differences in the levels of development of the countries themselves;
- insufficient competence of the specialists themselves;
- complexity of interpretation of terms due to incorrect translation;
- discrepancies between existing laws in Kazakhstan and the principles of IFRS.
It is important to entrust the implementation of international standards for auditing and financial reporting to professionals who can adequately assess the whole situation and find the right way out of the problems of inconsistency of the country’s applicable laws with international rules. The realization of the possibility of entering the international market and concluding large-scale contracts is one of the reasons for the desired transition to IFRS, but it is important to carry out the procedure itself comprehensively with the participation of accountants, tax specialists, as well as lawyers and economists. Only in this case, the company management can hope for beneficial results and coordinated work of employees.