The International Financial Reporting Standards (IFRS) generate a global pattern concerning financial statements facing globalization and business performance, thus facilitating the processes of global incorporation of many companies in the world.
In the macroeconomic context, Honduras entered the free trade market with Central America, the Dominican Republic, and the United States.
The country has required a high-quality accounting framework that is understandable, comparable, reliable, transparent, and compatible with international standards and the adoption of specific accounting standards for operations with a lower level of complexity to facilitate economic decision making by financial sector participants, investors, lenders, suppliers, customers, government, and the general public. Accounting frameworks are important because the economic operations of companies are recorded based thereon.
Therefore, the IFRS implementation introduces Honduras in the international market, allowing Honduran companies to compare and make exchanges at all levels. Additionally, it will attract foreign direct investment thereto.
Accounting and Auditing Standards Law
The legal framework for the IFRS implementation in Honduras was established by Legislative Decree 189-2004, contained in the Law on Accounting and Auditing Standards, and published in the gazette on February 16, 2005. The same decree created the JUNTEC (Junta Técnica de Normas de Contabilidad y Auditoría – Technical Board of Accounting and Auditing Standards), an independent technical body that implemented the International Financial Reporting Standards in Honduras from 2008 and has generally overseen the operation of the aforementioned law since then.
Regulatory entity
The JUNTEC is the supreme body and the highest authority on accounting and auditing standards, so it has the power to set accounting standards for small, medium, and large companies not subject to the application of IFRS. This board will be in charge:
- Adoption of the International Financial Reporting Standards (IFRS) issued by the IASB (International Accounting Standard Board), the International Standards on Auditing (ISA), the International Accounting Standards for the Public Sector (IAS-PS) issued by IFAC (International Federation of Accountants), and any others issued by them.
- Standards and resolutions to create the accounting frameworks of reference for use in Honduras.
Accounting framework in Honduras
There are two types of accounting frameworks: for general use and for specific use.
The accounting frameworks for general use are the complete IFRS and the IFRS for SMEs, which are used by less than 5% of the companies in Honduras.
The accounting frameworks for specific use, regulated by those bodies seeking a special objective such as those pursued by the world bank or IDB in its development program, the national commission of banks and insurance in the accounting of supervised entities, and the best known which are the policy of public administration which is 90% of the accounting used in Honduras.
Who will apply IFRS in Honduras?
The purpose of the Law on Accounting and Auditing Standards is to establish the necessary regulatory framework to apply IFRS and ISA, to achieve an adequate preparation, presentation, review, and certification of accounting and financial information, guaranteeing transparency and comparability thereof, generating the required confidence both nationally and internationally.
Public or private companies must apply IFRS when issuing financial statements for general information purposes for all economic activities as of January 1, 2008.
What are the IFRS in Honduras?
- Complete IFRS – They will be used by the financial system, those listed on the stock exchange, and those who wish to adopt them.
- IFRS for SMEs – Approximately 95% of Honduran entities will use them.
According to Agreement No. 3 issued by JUNTEC, companies or institutions that, according to this agreement, are not required to apply IFRS and must prepare and file their financial statements according to the NHOC (Normas Hondureñas de Contabilidad – Honduran Accounting Standards) issued and published by JUNTEC, which will be in effect as from 2009.
