How an IFRS Review Works
The review typically begins by identifying significant accounting areas and transactions that could materially affect the financial statements. Reviewers then evaluate the relevant facts, contractual terms, accounting policies, supporting calculations, and disclosures against applicable standards.
- Scope assessment: Identify significant balances, transactions, entities, and reporting areas requiring IFRS analysis.
- Accounting treatment: Evaluate recognition, measurement, classification, and presentation decisions.
- Judgment review: Assess assumptions and estimates used where IFRS requires management judgment.
- Disclosure assessment: Check whether required explanations, reconciliations, and supporting information are appropriately presented.
- Documentation: Maintain evidence supporting conclusions, interpretations, calculations, and management decisions.
A review should distinguish between accounting policy choices, estimates, transaction-specific judgments, and straightforward requirements. This makes the resulting financial reporting analysis more useful for controllers, auditors, finance leaders, and other stakeholders.
Key IFRS Areas to Examine
The appropriate scope depends on the business and its transactions. Revenue recognition, leases, financial instruments, impairment, provisions, business combinations, income taxes, and consolidation frequently require detailed assessment.
For revenue arrangements, IFRS 15 provides the framework for evaluating contracts with customers, including identifying performance obligations, determining transaction consideration, allocating consideration, and recognizing revenue when obligations are satisfied.
For leases, IFRS 16 is important when determining whether arrangements contain leases and how qualifying lease liabilities and right-of-use assets should be recognized and subsequently measured. These assessments can materially affect the balance sheet, expenses, and financial ratios.
Financial Reporting and Accounting Controls
An IFRS Review should connect technical accounting conclusions with the underlying accounting records. The chart of accounts should support appropriate classification and reporting so that transactions flow consistently into the general ledger and financial statements.
Procurement transactions can also affect IFRS reporting. A purchase order may provide evidence about contractual commitments, goods or services received, pricing, and timing, all of which can contribute to accurate accounting analysis and supporting documentation.
Control evidence is especially important when accounting conclusions depend on approvals, contractual terms, or management estimates. Audit Trails can document each step in vendor management, whether performed by humans or AI, supporting transparency and review of the underlying activity.
Tax and Transaction Considerations
Tax-related transactions may require coordination between IFRS accounting and applicable tax rules. During an IFRS Review, finance teams may examine whether sales tax and related jurisdictional requirements have been appropriately considered in transaction records, particularly where nexus, exemptions, VAT or GST treatment, or tax documentation affects the accounting analysis.
Tax accounting should remain distinct from financial reporting requirements, but the two areas should be reconciled where differences affect deferred tax balances, disclosures, or the measurement of assets and liabilities.
IFRS Compliance and Review Evidence
A focused IFRS Compliance Review examines whether financial reporting policies and practices conform to applicable IFRS requirements and whether supporting controls and documentation are adequate. It can be particularly useful when reporting processes span multiple entities, jurisdictions, ERP systems, or accounting teams.
Review documentation should explain the relevant standard, facts considered, accounting conclusion, significant judgments, supporting calculations, and required disclosures. Where interpretations involve substantial judgment, documenting the rationale helps maintain consistency across reporting periods.
Practical Best Practices
- Maintain an IFRS accounting policy framework: Document policies for significant recurring transactions and update them when applicable requirements change.
- Prioritize material areas: Focus detailed review procedures on transactions and balances that can materially affect financial statements.
- Connect contracts to accounting: Review contractual terms when determining revenue, lease, financing, and other transaction treatments.
- Document judgments: Record assumptions, estimates, alternatives considered, and reasons supporting significant accounting conclusions.
- Coordinate financial systems: Align ERP configurations, reporting structures, master data, and accounting policies with the intended IFRS treatment.
- Review disclosures: Confirm that financial statement notes adequately explain significant accounting policies, judgments, estimates, and required quantitative information.
Organizations can strengthen the process by scheduling IFRS reviews before major reporting deadlines rather than waiting until financial statements are substantially complete. Early assessment gives finance teams more time to validate data, refine accounting treatments, and prepare supporting disclosures.
Summary
IFRS Review evaluates whether accounting treatments and financial reporting practices align with applicable International Financial Reporting Standards. It covers recognition, measurement, presentation, disclosures, judgments, controls, and supporting evidence. A disciplined review helps finance teams produce consistent financial statements, strengthen audit readiness, and improve the quality of financial information used for business and investment decisions.