What is UFRS (IFRS)?

International Financial Reporting Standards (IFRS) is a term that has been established in Turkish as Uluslararası Finansal Raporlama Standartları (UFRS). In short, it is a set of standards that allows companies from different countries to compare their financial reports with each other.

The most important benefit of IFRS is that it enables companies that have invested in different countries to monitor their investments and examine their financial reports. Another important feature of IFRS is that it can be interpreted through a single standard or, in other words, a single language. To elaborate a bit, it is quite easy for an investor to read reports prepared by companies in accordance with IFRS. The country in which the company is located has no significance. Additionally, investors have the opportunity to invest in any desired company without country differences.

In 2005, IFRS was made mandatory for companies in EU member countries. Reports of companies using IFRS standards can be accessed clearly and easily by those who are knowledgeable about these standards.

What is the Purpose of IFRS?

The primary goal of IFRS standards is to improve investor relations. When many different countries create financial reports and tables simultaneously with the same standards, foreign investments can easily understand these reports and tables. IFRS reporting examples are presented at a level that is easily understandable and interpretable by investors from all over the world. Today, IFRS standards, recognized by more than 150 countries, provide a standard that allows investors to analyze reports and take action without knowing the language of the country they wish to invest in. Thanks to the advantages of IFRS standards, they are frequently encountered in all types of reports and tables today. The analysis and interpretation of tables and reports created outside IFRS standards require translation and adaptation processes.

What Are IFRS Standards?

The currently accepted IFRS standards are as follows:
● IFRS 1 First-time Adoption of International Financial Reporting Standards
● IFRS 2 Share-based Payment
● IFRS 3 Business Combinations
● IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
● IFRS 6 Exploration for and Evaluation of Mineral Resources
● IFRS 7 Financial Instruments: Disclosures
● IFRS 8 Operating Segments
● IFRS 9 Financial Instruments
● IFRS 10 Consolidated Financial Statements
● IFRS 11 Joint Arrangements
● IFRS 12 Disclosure of Interests in Other Entities
● IFRS 13 Fair Value Measurement
● IFRS 14 Regulatory Deferral Accounts
● IFRS 15 Revenue from Contracts with Customers
● IFRS 16 Leases
● IFRS 17 Insurance Contracts

What Information Is Included in IFRS Reports?

The information contained in IFRS reports includes:
● Statement of Comprehensive Income
● Explanations of Financial Statements
● Statement of Changes in Equity, also known as the Statement of Retained Earnings
● Statement regarding the Company’s Financial Position
● Cash Flow Statement

In Which Countries Is UFRS (IFRS) Used?

Recognized in more than 150 countries worldwide, IFRS is frequently used, especially by European Union countries. However, in the USA, the US GAAP, which is the country’s own financial reporting system, is generally used. Like the USA, Canada and the UK have also chosen their own reporting standards and continue to use them.

In Turkey, the Capital Markets Board and the Banking Regulation and Supervision Agency have enacted the Turkish Accounting Standards. These standards are significantly compliant with and similar in structure to IFRS. Therefore, the financial reports of companies in our country can easily be understood by investors who are knowledgeable about IFRS.

Today, global markets have become much more accessible. Moreover, compared to this situation, competition is experienced much more intensely than before. This also brings standardization in accounting and financial reports. IFRS, or UFRS in Turkish abbreviation, provides significant ease and convenience for both company managers and investors.

What Purpose Was UFRS Created For?

The objective of the International Financial Reporting Standards (UFRS) is to make it easier for investors, users of financial statements, and publicly traded companies to compare their financial statements with one another and with their own business's financial situation on an international level. Thanks to this feature, IFRS also offers the opportunity to measure performance and is a system accepted and regularly applied worldwide.

Why Is UFRS Important?

International Financial Reporting Standards (UFRS) promote and support trust and transparency in global financial markets, particularly among companies that have listed their shares in these markets. In the absence of these standards, investors tend to be more hesitant to trust the financial statements and other information presented to them by companies. This lack of trust can lead to fewer transactions and an economy that is not robust.

Similarly, IFRS allows for comparisons between one company and another, thus enabling investors to analyze companies by performing a fundamental analysis of a company’s performance.

Who Can Use UFRS (IFRS)?

Companies are required to provide a summary of their accounting policies along with statements such as the Company Financial Position Statement, Comprehensive Income Statement, Cash Flow Statement, Statement of Changes in Equity (Statement of Retained Earnings), and explanations of financial statements. The recent period's report is provided together with the previous period's report, allowing for observation of changes in profit and loss.

What Is UFRS Audit?

UFRS audit is the examination of reports maintained by another entity for compliance with UFRS standards by authorized firms in this area. Today, many firms conduct UFRS audits. Organizations of all sizes collaborate with UFRS auditing firms to ensure that their financial statements comply with UFRS standards.

What Are the Benefits of UFRS?

There are many benefits provided by the National Financial Reporting Standards. Some of these include;
• If companies adopt the globally defined UFRS, they can enter the path of existence in a global context.
• UFRS ensures that financial statements in the same language are more understandable and reliable.
• UFRS does not contain interpretations. Reports consist of very simple, unbiased, and accurate information.
• UFRS provides transparency and comparability to companies.

Differences Between UFRS and GAAP

• Differences in accounting methods for inventory costs
• UFRS recognizes intangible assets if they are expected to generate future economic benefits. GAAP, on the other hand, does not consider any future additions when recognizing intangible assets.
• GAAP has viewed the accounting process as a set of rules and procedures that does not allow for interpretation. UFRS, however, allows for flexibility in interpretation and stating principles.
• UFRS is generally broader than GAAP when it comes to revenue recognition.
• In UFRS, no distinction is made between liabilities. Short-term and long-term liabilities are grouped together. GAAP classifies them as current and non-current liabilities.