The importance of IFRS in Nicaragua?
The concept of globalization brought with it the need for worldwide harmonization of accounting criteria, emerging as an effective tool the international scheme called International Financial Reporting Standards (IFRS). Nicaragua is incorporated in the globalization process in order to recognize and apply widely accepted standards worldwide.
With the application of IFRS, Nicaragua has a uniform accounting framework that allows users to compare financial information in a consistent manner, as well as improve transparency in the markets and use good accounting practices.
In addition, foreign investors will be more interested in placing their financial resources in the country, since they will have access to financial statements formulated in an international language that eliminates what is known as accounting risk, one of the greatest barriers to investor confidence.
Accounting framework in Nicaragua
The International Financial Reporting Standards – IFRS and their Interpretations, and the International Financial Reporting Standards for Small and Medium Sized Entities (IFRS for SMEs) are recognized as the regulatory framework in Nicaragua, which will be applied as they are issued by the International Accounting Standards Board (IASB) and its Interpretations Committee.
Therefore, the regulatory accounting framework in Nicaragua applicable to entities as they qualify are:
- Integral IFRS apply those entities that have public accountability obligations:
- Entities listed in the capital markets.
- Financial and insurance entities.
Comprehensive IFRS comprise:
- International Financial Reporting Standards (IFRS).
- IFRS Interpretations (IFRIC).
- International Accounting Standards .
- Interpretations of IAS (SIC).
- The IFRS for SMEs are applied by those entities that:
- Do not have a public accountability obligation :
An entity is publicly accountable if:
- (a) its debt or equity instruments are traded in a public market or are in the process of issuing these instruments for trading in a public market (whether a domestic or foreign stock exchange or an off-exchange market, including local or regional markets) or.
- b) one of their main activities is to hold assets in a fiduciary capacity for a broad group of third parties. This is usually the case for banks, credit unions, insurance companies, stock exchange intermediaries, mutual funds and investment banks.
- They publish financial statements for general information purposes for external users. Examples of external users are owners who are not involved in the management of the business, current and potential creditors and credit rating agencies, who do not require financial statements for specific purposes or tailored to their particular needs to be presented to them.
The IFRS for SMEs comprises the International Financial Reporting Standard for Small and Medium-Sized Entities – IFRS for SMEs.
Governing body that establishes accounting standards in Nicaragua
The College of Public Accountants of Nicaragua is the national institution that governs the accounting profession in the country, which provides security to public and private institutions. It is in charge of accounting and auditing standards, and integrates all Public Accountants in Nicaragua.
It is a commitment of the profession through the College of Public Accountants of Nicaragua (CCPN) to collaborate closely in the development and harmonization of professional standards in line with the dynamic evolution of the profession worldwide, to improve the transparency of financial information for the benefit of companies and the country.