International Accounting Standards: What you need to know

Following International Financial Reporting Standards (IFRS) helps your clients maintain consistent, comparable, and compliant financial records.

This poses all sorts of benefits for your clients – from access to investment and credit, to international expansion and trade. Clients will rely on you to help them comply with these standards, so getting a good grasp on IFRS is a practice-essential.

In this guide, we explore international financial reporting and accounting standards, highlighting the benefits of complying with them, and overcoming the common challenges with supporting clients with IFRS.

What are International Accounting Standards?

‘International accounting standards’ can refer to general guidance for making financial information transparent, consistent, and comparable across countries. Or, it can apply to the specific International Accounting Standards (IAS) set out by the International Accounting Standards Council (IASC).

IAS was used between 1973 and 2000, where several standards were released over the years. In 2001, the IASC was replaced by the International Accounting Standards Board (IASB), and standards released since are called International Financial Reporting Standards (IFRS).

Some International Accounting Standards (IAS) have been removed or replaced by IFRS, while others are still used. You can register on the IFRS website to see the current standards. For the purpose of this guide, we refer to IFRS and IAS as, simply, IFRS.

There are many different IFRS standards and requirements. Here are some to get your started:

• Disclosing complete sets of financial statements annually. These include a balance sheet, income statement, statement of changes in equity, and cash flow statement.
• Providing comparative information from a previous period, for amounts reported in the current period.
• Disclosing information about a company’s sustainability related risks and opportunities (under IFRS S1 and IFRS S2).

If you’re working with clients overseas, following international standards like IFRS is essential for accurate and compliant reporting. Meeting IFRS requirements can also make your clients more attractive to investors or creditors, since financial information can be easily assessed and compared.

Benefits of mastering IFRS

Understanding IFRS opens you and your clients up to international opportunities. You can serve a broader range of clients with international reporting requirements, and gain a deeper understanding of compliance and international markets.

Here are some more benefits of aligning with IFRS.

Building client trust through compliance

Meeting international reporting standards shows your clients you take compliance seriously, and can help them succeed in global markets.

IFRS compliance helps your clients meet global regulatory standards. Plus, external stakeholders and investors also rely on IFRS-compliant reports to determine whether your clients’ businesses are a worthy investment.

Investors look at specific financial statements and reports to get a sense of a business’s financial picture and potential. Having a reliable reporting tool that lets you generate accurate, IFRS-compliant reports will save you time and help clients meet investor standards.

Xero accounting software comes with financial reporting features that automatically align with IFRS, making it easier for you to generate standardised and compliant reports for clients. Multi-currency features also ensure reports are updated with the right currencies in real-time so your reports are accurate and compliant.

Securing global business opportunities for clients

For clients keen to explore global expansion, meeting international reporting standards is a non-negotiable.

You can play an integral role in helping clients attract new business opportunities through IFRS compliance. Whether that be investment, global expansion, or something else altogether.

This means your practice opportunities expand too, because you can service businesses that operate globally. This could become a specialism and point of difference that makes your practice stand out compared to others. Also, it could mean delivering additional services for your existing client base, increasing your average earnings per client.

If your clients operate in multiple countries, you’ll need to be able to produce reports in several different currencies. This could quickly become a repetitive and time-consuming task. But, with accounting software, like Xero, you can get multi-currency functionality so you can create IFRS-compliant reports and help clients manage cross-border transactions. Real-time currency conversions and multi-currency bookkeeping features can enable you to maintain accurate financial records and reports across clients and jurisdictions.

Increasing efficiency in client financial processes

Once you adopt international reporting standards, you can adapt your practice processes and operations to fit them.

With multiple clients following the same rulebook, providing your accounting tools meet IFRS requirements, you can use a single piece of software for everyone. Automating repetitive admin tasks can be a significant timesaver. Instead of spending hours on reconciliation and drawing up reports manually, you can use software that accurately predicts matches for statement lines and generates reports based on live data.

Modern accounting software gives you bookkeeping and reporting features that scale – this means you can use the same digital processes and features for all clients. Xero accounting software has features, such as connected bank feeds, which import live transaction information from clients automatically, and reconciliation predictions which help you find matches for statement lines. This live, accurate information can then be used to generate reports in a few clicks.

Common challenges with IFRS compliance

More than anything, supporting clients with IFRS is a resource challenge. Most practices already feel the strain of handling multiple clients and workloads and keeping up with UK regulation – let alone international requirements, too.

Here, we look at how to address the most common challenges with IFRS compliance.

Simplifying complex and evolving standards

IFRS standards are regularly updated, meaning accountants and bookkeepers have to track changes to ensure compliance. Amendments and new standards are available on the IFRS website, but monitoring this manually and relaying it to your practice team isn’t very efficient.

Opting for compliance software that’s automatically updated in line with new regulation can take the pressure off. Xero accounting software is developed in line with regulations and industry best practices, so features are fit for various compliance requirements. You can create IFRS-compliant reports in a few clicks, using your clients’ bookkeeping data.

Managing cross-border transactions for clients

To comply with IFRS, you’ll need to manage multiple currencies and cross-border transactions for clients (under IAS 21). According to IAS 21, your clients must identify their functional currency – this is the currency used in the main place where they generate and spend cash.

When a transaction occurs in a foreign currency, businesses are then required to convert this into their functional currency using the exchange rate at the time. Because exchange rates fluctuate, the rate used to record a transaction will likely be different to the one used when businesses later come to report their income and expenditure. Differences between the exchange rate used to record the transaction and the closing rate are captured on the income statement as foreign exchange gains or losses.

Keeping up with exchange rates and recording multiple currency transactions could prove tricky for clients who don’t use digital recordkeeping, and have financial data spread across programmes and devices.

To tackle this, practices need to be able to record and manage multi-currency transactions, and ensure accurate currency conversions in line with IAS 21. With Xero accounting software, you have access to multi-currency functionality and exchange rates are updated in real-time. Recording transactions in the correct currencies happens by default, ensuring IAS 21 compliance and taking the complexity out of cross-border transactions.

Bridging resource gaps to support clients

If you’re already overstretched and under-resourced, you might lack the capacity to handle IFRS compliance for multiple clients. Supporting clients with IFRS needs to happen alongside other practice activities, like tax preparation, financial planning, and other regulatory compliance tasks.

But, you don’t always need an extra pair of hands to take care of additional work. In fact, by using automation to reduce manual work, such as data entry, reconciliation, and reporting, you can gain back hours to spend on the more complex parts of compliance.

Xero accounting software comes with inbuilt features, such as connected bank feeds and reconciliation predictions, that make regular bookkeeping tasks faster and more accurate. But, you can also add apps, like Hubdoc, which lets your clients snap a photo of a receipt on their smartphone and upload it directly to Xero, where transaction information is extracted for you. Tools like this mean you spend less time on admin and create space for complex, high value work.

Four steps for accountants to support clients in mastering IFRS

Getting on top of IFRS doesn’t have to be complex, and you shouldn’t need to double the size of your team to take care of compliance. Let’s look at some steps practices can take to master IFRS compliance.

1. Educate clients on IFRS requirements

Educating clients on IFRS is fundamental to compliance. Your clients will be involved in IFRS processes, even if it’s just updating you on their operating locations, sharing plans for expansion, or providing evidence and documentation.

There are plenty of ways you can keep clients in the loop; producing factsheets on IFRS basics, using some of your advisory time to talk through compliance, or guiding them towards online resources that can help.

The IFRS website has plenty of information to get started with – though you may need to translate some of the complex financial terms. If you choose Xero accounting software to support you with IFRS, we have plenty of learning materials and resources like webinars, guides, and live events to help you get the best out of compliance features.

2. Use technology to simplify client compliance

Automate as much manual admin as you can so that you have more time to focus on complex IFRS requirements and client needs. Look for software that lets you handle multiple clients and currencies in one place, making it easier to track the progress of compliance work.

With Xero accounting software, you get features that take care of admin and simplify complexity. Bank feeds and reconciliations predictions make bookkeeping faster. Client transaction data automatically flows through sets of accounts, tax returns, and draft reports.

You can easily generate income statements, balance sheets, and cash flow reports in a matter of clicks, using live and accurate data. Plus, clients on Xero can invoice and receive payments in more than 160 currencies. Currency changes are viewable on transactions and reports, so clients can see how trends impact their cash flow.

3. Enhance collaboration with clients on IFRS

To support clients with IFRS, you need a deep understanding of their business and where and how it operates. Compliance processes slow down when you and your clients can’t share information and documents securely and quickly.

Make sure the processes and systems you use for communicating and collaborating are user-friendly. For example, if you require signatures on physical reports, getting these to and from clients could be time-consuming.

Instead, using an eSignature tool means clients can sign off on documents while they’re at their desk, in a couple of clicks. Cloud-based accounting software is the perfect collaboration tool, because you and your clients can both access it at the same time from anywhere – providing you have an internet connection.

In Xero accounting software, you can share reports and documents securely with clients, and there’s even eSignature functionality to get things signed off quickly. The benefits of this extend beyond compliance – you can share a cash flow forecast instantly if their position changes, and help clients make good financial decisions based on live data.

4. Create 3-to-6 month roadmap for mastering IFRS compliance

It’s useful to plan changes to your compliance processes in phases, so your team and clients have plenty of time to familiarise themselves with new approaches.

Here’s an example:

• Month 1-2: Start by educating clients on IFRS requirements and performing an initial internal audit to assess compliance and identify gaps.
• Month 3-4: Put processes and software in place to automate compliance tasks, simplify processes for your clients and team, and improve reporting quality and accuracy.
• Month 5-6: Regularly review progress with clients, fine-tune processes, and establish long-term compliance plans.

Empowering clients through IFRS compliance

Businesses grow when opportunities are abundant. By mastering IFRS compliance, you can help your clients gain new international opportunities and secure them for your practice, too.

While compliance work is complex and time-consuming, it doesn’t all need to fall on your team. Software can automate administrative processes, leaving you free to support clients with strategic, high-value work.

Cloud-based software that works for your team and clients can save you time, improve accuracy, and make IFRS compliance more manageable. Xero gives you the tools to tackle IFRS compliance, and help clients build healthy businesses.