What Is IFRS Accounting?
IFRS accounting is the organization of the collection, classification, and recording of financial information so that financial statements can be prepared on its basis in accordance with International Financial Reporting Standards. For an accountant in Kazakhstan, the work involves more than preparing the final reporting forms: it is necessary to define accounting policies, ensure documentary evidence of transactions, make professional judgments, and disclose material information.
When organizing IFRS accounting, an accountant analyzes the economic substance of transactions. Therefore, a single correct journal entry may not be sufficient. It is important to determine when the entity obtains control of an asset, whether a liability arises, over what period the economic benefits are consumed, and which estimates should be revised at the reporting date.
In practice, companies may maintain separate financial accounting records under IFRS or transform accounting data when preparing financial statements. The choice of approach depends on the business structure, information system, number of transactions, and requirements of financial statement users. The adopted methodology should be applied consistently, made verifiable, and documented in internal documents.
Accounting and Financial Accounting under IFRS
To organize accounting under IFRS, the composition of the financial statements and the range of companies, divisions, or branches whose data must be included are determined first. The chart of accounts is then mapped to the financial statement items, and a list of required adjustments is prepared.
The practical process may include the following stages:
- collecting accounting data and source documents;
- checking the completeness of transactions for the reporting period;
- classifying assets, liabilities, income, and expenses;
- calculating estimates;
- recording transformation or parallel journal entries;
- reconciling turnovers, balances, and intragroup transactions;
- preparing reporting forms and explanatory notes;
- performing internal control of calculations and disclosures.
Financial accounting under IFRS should be organized so that every material amount can be traced from the reporting form to the register, calculation, and source document. For accounting estimates, the accountant should retain the source data, a description of the method, the assumptions used, and confirmation that the calculation was approved by the responsible person.
Accounting policies must reflect the company’s actual transactions. Simply copying a standard document is insufficient: the policies establish the applicable recognition criteria, measurement methods, procedure for determining useful lives, inventory count rules, approach to materiality, and period-end closing procedure. When a new transaction arises, its economic substance is analyzed first, followed by determining how it should be accounted for.
IFRS and management accounting may use the same source data, but they serve different purposes. Management reports are prepared for internal decision-making, while financial statements present the entity’s financial position and results to users of the financial statements. Therefore, the indicators of the two systems may differ in classification, level of detail, and applied estimates. Such differences should be documented and reconciled regularly.
Accounting for Property, Plant and Equipment and Inventories under IFRS
Accounting for property, plant and equipment under IFRS begins with an analysis of the item. It is important for the accountant to determine whether the company controls the resource, whether economic benefits are expected from it, and whether its cost can be measured reliably. The costs of acquisition, delivery, installation, testing, subsequent maintenance, and replacement of significant components are analyzed separately to determine how they should be accounted for.
For each item or group of items, it is advisable to maintain a register showing the initial measurement, date when ready for use, useful life, depreciation method, accumulated depreciation, and subsequent changes in estimates. If significant parts of an item have different periods over which benefits are consumed, they are considered separately when determining the accounting treatment. Indicators of impairment are analyzed when preparing the financial statements and on other dates specified in the internal closing schedule.
Accounting for inventories under IFRS involves determining when they are recognized, the components of their cost, and the cost allocation method. Cost includes expenditures whose attribution to the cost of inventories is justified by the applicable accounting policies and that are incurred in bringing the inventories to their present location and condition. Abnormal losses, storage expenses, and administrative costs are analyzed separately to determine their appropriate accounting treatment.
For reliable inventory accounting, it is useful to ensure:
- consistent nomenclature and units of measurement;
- separation of the entity’s own inventories from assets belonging to third parties;
- documentation of movements between warehouses and divisions;
- regular reconciliation of warehouse records and financial accounting;
- analysis of slow-moving, damaged, and obsolete items;
- confirmation of balances through inventory counts.
At period-end, the accountant analyzes the carrying amount of inventories and the calculation of the amount that the entity expects to receive from their sale or use. The calculation should be based on available documents and reasonable assumptions. When an estimate changes, the new calculation and a description of the reasons for the change are retained.
Accounting for Options and Preparing Financial Statements
The accounting treatment of options under IFRS cannot be determined solely from the title of the agreement. Its terms are examined first: the parties to the transaction, the underlying asset, the settlement method, whether a right or obligation exists, the exercise conditions, and the instrument’s economic purpose. Options may be used in financial transactions, employee compensation programs, and agreements with owners. The accounting treatment is determined with consideration for the substance of the specific agreement and the circumstances of the transaction.
Before recording the transaction, the accountant should obtain the agreement, appendices, decisions of the governing bodies, and valuation calculation. If the terms are complex, specialists in financial reporting, valuation, and law may participate in preparing the accounting conclusion. The selected approach, source data, and factors that may affect the instrument’s classification or measurement are documented in the working file.
When automating IFRS accounting, journal entries, analytical accounting settings, currencies, divisions, data transfer rules, and the composition of reporting forms are checked. The settings and report generation algorithms depend on the information system used and its version. Before closing the period, the accountant should check that the settings comply with the adopted accounting policies, that the data have been loaded completely, the rounding results, and the linkage between the final figures and the registers and calculations.
For 2026, the entity should approve a closing calendar identifying the persons responsible for each area, deadlines for submitting calculations, and control procedures. The scope of transactions and applicable requirements are determined with consideration for the entity’s status, type of activity, and composition of the financial statements being prepared.
For insurance and reinsurance organizations, the Tax Code of the RK provides for a special transitional rule for the reporting tax period from 1 January to 31 December 2026. It concerns the recognition of certain income and deductions related to the transition to IFRS 17 “Insurance Contracts,” as well as differences between net profit according to the prescribed reporting and audited financial statements for 2023–2025. These provisions also apply to the Export Credit Agency of Kazakhstan (Article 844 of the Tax Code of the RK).
Frequently Asked Questions
How does IFRS accounting differ from the preparation of IFRS financial statements? — Accounting covers data collection, classification of transactions, calculations, and controls throughout the period. Financial statements are the final presentation of the processed information together with the necessary explanatory notes.
Can IFRS accounting be maintained solely through transformation? — A company may use transformation if the selected organization of the process ensures the completeness of adjustments, a clear link to the source data, and control over the transfer of results between periods. The adopted method is documented in internal procedures.
How should accounting for property, plant and equipment under IFRS be organized? — The unit of account, components of initial cost, date when ready for use, useful lives, and subsequent measurement procedure should be determined. Material decisions, calculations, and changes in estimates are documented.
What should be checked when accounting for inventories under IFRS? — Rights to inventories, completeness of warehouse data, components of cost, consistent application of the selected cost allocation method, and indicators affecting the measurement of inventories are checked. Balances are confirmed through inventory counts and reconciliations.
Does management accounting always correspond to IFRS accounting? — No. Management indicators are prepared for internal business purposes and therefore may differ in composition, analytical detail, and measurement methods. Differences should be explained and supported by regular reconciliations.
Sources
- Tax Code of the Republic of Kazakhstan, Article 844 “Transitional Provisions on Income and Deductions under Insurance and Reinsurance Contracts.”