Did you know financial reporting via International Financial Reporting Standards (IFRS) is the required Accounting framework approved by ICATT (Institute of Chartered Accountants of Trinidad and Tobago); our local regulatory body, for financial statements prepared by reporting entities in Trinidad and Tobago? Sounds good, but what does this mean for your business? What are these standards and how will they impact your Company's bottom line?
International Financial Reporting Standards (IFRS) are set rules and guidelines that ensure your financial statements are consistent, transparent and comparable, worldwide. They are issued by the International Accounting Standards Board (IASB).
Based on standard IFRS requirements, all financial statements must include:
1. Statement of financial position. Also referred to as the balance sheet, this statement lists all assets, liabilities and equity of a Company. It paints the clear financial position of the Company as at its reporting date.
2. Statement of comprehensive income. This statement contains the details of the revenue, income, expenses and losses of a Company that have not yet been realized as at the date the financial statements have been prepared/ presented.
3. Statement of changes in equity. Also referred to as the statement of retained earnings, it measures the changes in a Company’s equity over the specific reporting period. This statement starts with the beginning equity balance, and then adds or subtracts items such as profits and dividend payments to arrive at an end balance. While this is not considered an essential part of reporting monthly financial statements, it is a
best practice to form part of annual financial statements.
4. Statement of cash flows. This statement summarizes the movement of cash and cash equivalents in and out of a Company for a specific reporting period. It reports on how well a Company can manage its cash position i.e., how well the Company can generate cash to fund its operating expenses and fulfill debt obligations.
Companies wishing to present its financial position and financial performance fairly and consistent with international best practices should adhere to these reporting standards. Individuals and Companies who follow IFRS guidelines are more likely to benefit from investors because of the transparency and consistency of their reporting.
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