IFRS (International Financial Reporting Standards) Compliance

Hi Team,

Trust everyone’s doing great. Any plans on making the Accounting module in ERPNext IFRS compliant? I believe Nabin started some work on this sometime back but not sure what became of it

Many thanks



What would be needed?

Hi Rushabh, pls find below:

Elements of financial statements

The elements directly related to the measurement of the statement of financial position include:

Asset: An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.
Liability: A liability is a present obligation of the entity arising from the past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits, i.e. assets.
Equity: Nominal equity is the nominal residual interest in the nominal assets of the entity after deducting all its liabilities in nominal value.
The financial performance of an entity is presented in the statement of comprehensive income, which consists of the income statement and the statement of other comprehensive income (usually presented in two separate statements). Financial performance includes the following elements (which are recognised in the income statement or other comprehensive income as required by the applicable IFRS standard):

Revenues: increases in economic benefit during an accounting period in the form of inflows or enhancements of assets, or decrease of liabilities that result in increases in equity. However, it does not include the contributions made by the equity participants (for example owners, partners or shareholders).
Expenses: decreases in economic benefits during an accounting period in the form of outflows, or depletions of assets or incurrences of liabilities that result in decreases in equity. However, these don’t include the distributions made to the equity participants.
Results recognised in other comprehensive income are limited to the following specific circumstances:

Remeasurements of defined benefit assets or liabilities (as defined in the standard IAS 19)
Increases or decreases in the fair value of financial assets classified as available for sale (with the exception of impairment losses)(as defined in the standard IAS 39)
Increases or decreases resulting from the application of a revaluation of property, plant and equipment or intangible assets
Exchange differences resulting from the translation of foreign operations (subsidiary, associate, joint arrangement or branch of a reporting entity, the activities of which are conducted in a country or currency other than those of the reporting entity) according to the standard IAS 21
the portion of the gain or loss on the hedging instrument in a cash flow hedge (or a hedge of a net investment in a foreign operation, as this is accounted similarly ) that is determined to be an effective hedge
The statement of changes in equity consists of a reconciliation of the changes in equity in which the following information is provided:

total comprehensive income for the period, showing separately the total amounts attributable to owners of the parent and to non-controlling interests;
for each component of equity, the effects of retrospective application or retrospective restatement recognised in accordance with IAS 8; and
for each component of equity, a reconciliation between the carrying amount at the beginning and the end of the period, separately disclosing changes resulting from:
profit or loss;
other comprehensive income; and
transactions with owners in their capacity as owners, showing separately contributions by and distributions to owners and changes in ownership interests in subsidiaries that do not result in a loss of control.
Statement of Cash Flows

Operating cash flows: the principal revenue-producing activities of the entity and are generally calculated by applying the indirect method, whereby profit or loss is adjusted for the effects of transaction of a non-cash nature, any deferrals or accruals of past or future cash receipts or payments, and items of income or expense associated with investing or financing cash flows.
Investing cash flows: the acquisition and disposal of long-term assets and other investments not included in cash equivalents. These represent the extent to which expenditures have been made for resources intended to generate future income and cash flows. Only expenditures that result in a recognised asset in the statement of financial position are eligible for classification as investing activities.
Financing cash flows: activities that result in changes in the size and composition of the contributed equity and borrowings of the entity. These are important because they are useful in predicting claims on future cash flows by providers of capital to the entity.
Notes to the Financial Statements: These shall (a) present information about the basis of preparation of the financial statements and the specific accounting policies used;(b) disclose the information required by IFRSs that is not presented elsewhere in the financial statements; and (c) provide information that is not presented elsewhere in the financial statements, but is relevant to an understanding of any of them.



Hello Team,

Just wondering if there’s any progress/plan on this? More and more countries are adopting the IFRS



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@wale will be great help if you can list out “specific” things that need to be changed.

Hi Rushabh,
Thanks a lot for your response. I believe the first critical step would be the Chart of Accounts. Please find a basic IFRS CoA at the link below:

Also, please find below a white paper about some of the considerations that need to be made in Financial Systems (Applications) regarding IFRS

Thanks plenty

Kind regards,Olawale

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Hi @wale,
For the chart of account, you can really build it on the IFRS model. That should not be an issue. Add child as needed.
Now that the cashflow report is available. Most of all IFRS requirement are there.


‎Hi @Francois,

Thanks for your input but if you check the reference I sent, the current IFRS CoA requires more root accounts than what ERPNext currently has. Last time I checked, ERPNext doesn’t allow you to add root accounts

Also, it’s better if the IFRS format comes as an in-built option that users can readily choose than having to build it yourself. I already updated my CoA to an older IFRS format so I’m not really thinking about myself here… this is something that’s important for the product itself (especially as the adoption of IFRS standards continues to increase globally)


Kind regards,

That must have been a while ago, because now you can add any number of root accounts!

Hi Rushabh,

Really? Awesome. I just noticed this. I had been clicking on the Accounts folder and expecting an option to add child. This helps a lot


Kind regards,

I looked into this a little and I guess out of the box there is (apart from the non existing numbers for accounts in ERPNext) one problem.

An Account in ERPNext needs to be either Credit (Cr) or a Debit [Dr] account while the IFRS template also knows mixed Dr/(Cr) accounts.
@rmehta With about 0 to none coding abilities still would think it shouldn’t be too difficult to enable mixed Dr/(Cr) accounts in the code of ERPNext though, right?

I looked into this a little and I guess out of the box there is (apart from the non existing numbers for accounts in ERPNext) one logical problem:

An Account in ERPNext needs to be either Credit (Cr) or a Debit [Dr] account while the IFRS template also knows mixed Dr/(Cr) accounts.

@rmehta With about 0 to none coding abilities still would think it shouldn’t be too difficult to enable mixed Dr/(Cr) accounts in the code of ERPNext though, right?

Hi @vrms,
I don’t think accounts in ERPNext needs to be either Credit or Debit… just change the sign in our amount and Cr. becomes a Dr. and vice versa.

u sure? There is a field to choose from credit/debit when using a .csv template to import accounts. … but yeah you are maybe right, that seems not to be mandatory to use. Well then it would just be a question of Setting up a template.

EDIT: just started making one here

Mixed accounts are important because based on their balance where they appear in the accounts is determined. For instance bank overdraft is not a negative current asset but a current liability. Not having it in current liabilities means your accounts are quite simply wrong. They are wrong because any ratio that uses the ratio of assets to liabilities is wrong and that is a basic analysis tool of anyone reading financial statements of which IFRS seeks to ensure that accounts are presented in a consistent manner to allow those interested to make informed decisions/assumptions. Without them accounting means nothing. Within a Organisation you provide context outside Financial Standards and the notes in the Accounts provide that context.

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Point taken @eamonn, but I am still not sure how the accounting in ERPNext is not providing for the account being either mainly on the dr. or cr. side. What should change?

@Francois_Ifitwala In a discussion about what ERPnext needs to do to be IFRS compliant then mainly really isn’t enough. It’s quite down the line either it is or isn’t. And it isn’t. As for what you do. I’m not a programmer but my process for dealing with this would be:

  1. Allow an account to be flagged as mixed (or floating as I more commonly see it described)
  2. If it is floating then you need to tell it where it should appear in the chart of accounts if it has a debit balance and where it should appear if it has credit balance (so for bank overdraft you would put it against the Current Liabilities sub level on the Liabilities (Sources of Funds) section and all other times in the Current Assets in the Assets Section (Application of Funds)
  3. In the report check if there are any floating accounts that make up the Chart of Accounts and if there are check their balance and show it in it’s appropriate section.

It seems like a simple logical process to me but I’ll not be coding it. Of course you can handle it by creating a bank overdraft account and journalling the balance out if it is overdrawn to the other account when you draw up the Balance Sheet however that is a workaround that is bound to end in tears not least as the business carries on whilst the Accounts Dept are drawing up the financial statements with new transactions hitting the bank account and with no single account now showing you your current bank balance it all gets a bit confusing.


You can always move the parent of an account in CoA. I don’t see this is an issue.

@rmehta OK that’s fine and a simpler and much cleaner solution than journalling however it is a manual process that needs to be remembered every time the financial statements are drawn up and a process that no other accounting software I have ever used before forces on the user. That unexpected behaviour will be off putting to professional book keepers and accountants and not appreciated by smaller businesses doing the accounts themselves who will potentially end up with a misleading view of their financial position.

As I said the logic is simple so if the programming is as simple why not sort it instead of worrying about new features. If you the the basics right then your software will be in a much better position and this is basic!

As to IFRS structure is everything so that is just one example. As I mentioned before you need a way to order the accounts in the chart of accounts in order to make then compliant. Again you have to go against the basic design and add a number scheme to the accounts in order to allow that so just put the number scheme in. It’s not old fashioned it’s needed to provide structure and if you can’t see the importance it’s because you don’t understand accounting. How do you set the order of liquidity within the charts of accounts without numbers? If you can’t answer it using your current name based approach then that’s the problem. The problem isn’t the numbers but the lack of consistency in following basic accounting rules which is one of the first things a book keeper or accountant is taught when learning the subject.

What all this just says is that the basic principles of accounting are not well understood where fudging the basic design becomes the norm. The norm should start with accounting standards if you want to be compliant with them and bring the software closer to expected behaviour! Needless oversimplification only leads to everyone that understands the imperfections to make changes that should be there. What a waste of everyone’s time and I don’t think that’s what you want.

I think you genuinely have a great product however I do think that the accounting is very hard work and that’s without even going in depth with it.

‎@Rushabh, regarding the standards for charting accounts based on credit or debit balance, I do think it will be far from ideal to have to manually change parent accounts every time a financial report is drawn up! Having some options to select where an account should appear in the report based on its balance (debit or credit) would be a much neater approach

Also, the order of liquidity is quite significant when it comes to standards. Much as I love the existing naming system (probably because I’m not an accountant by training), ‎it will likely be better for the product (and ultimately for the end-users) to have a way of ordering accounts which traditionally has been by numbering

Just a few months back, I was invited to make a presentation for a medium sized organisation trying to decide between ERPNext and Sage. The only issue that the consultant hired by the organisation had with ERPNext was the lack of a numbering system for the accounts

I love ERPNext for its simplicity and ease of use but it’s becoming obvious‎ now that there’s increasing interest and attention in the product from organizations at different levels. Standardization is inevitable for a product as dynamic and endearing as ERPNext. Adding a numbering (or ordering) system for Accounts takes nothing away from the product; those who don’t need it can ignore it and those who require more standardized reporting can use it. At least consider putting this on your to-do list

Finally, as much as having connectors to more established applications is great, Accounting is central to the functionality of an ERP. For many organizations, the whole idea of implementing an ERP in the first place‎ is to do away with the use of multiple systems! Yes, I know that connectors give some level of integration but nonetheless, I would just like to advise that the team continues to concentrate more on improving the functionality of the in-built Accounting package

As always, I continue to be grateful for the awesome product that is ERPNext and the even more awesome team behind it :slight_smile:

Kind regards,