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Finance glossary

What are International Financial Reporting Standards (IFRS)?

Bristol James
7 Min

The International Financial Reporting Standards (IFRS) are a set of international rules and regulations for public companies when they are issuing financial statements. These regulations were designed to make the financial information coming from large companies understandable, uniform, and comparable from country to country.

Issued by the International Accounting Standards Board, the IFRS replaced the International Accounting Standards in 2001. These thoughtful and detailed rules give specific guidance as to how public companies should maintain their financial records and report key metrics. Since they use a common accounting language, they can be understood and implemented by financial leaders all over the globe.  Every major market follows the IFRS guidelines except the US, Japan, and China, which have their own national accounting standards.

How has the IFRS evolved over time?

As mentioned, up until 2001, the International Accounting Standards were the benchmark for public companies. The IAS were created by the International Accounting Standards Committee (IASC) to make it easier to compare businesses around the world, boost transparency within financial reporting practices, and propel global trade activities. With universal standards paving the way, companies save money on regulatory costs and compliance activities because multinational organizations only have to use one set of accounting standards.

As it stands today, the IFRS were developed in the European Union and were rapidly adopted at scale. There are currently 168 jurisdictions that fall under the IFRS, making it the most-used set of international accounting standards in history. Corporations aren’t the only entities to benefit from this set of standards; investors, analysts, and business stakeholders use the IFRS when evaluating companies.

What are IFRS requirements?

As of 2024, the International Financial Reporting Standards bring together IFRS accounting standards, IAS standards, and IFRIC interpretations to create a comprehensive set of regulations for businesses and related entities. Ranging from share-based payments to financial instruments and operating segments, the IFRS sets global accounting standards for most business transactions. First, the IFRS details a set of IFRS financial reporting statements that are required:

  • Statement of Financial Position: also referred to as the balance sheet, the Statement of Financial Position requires companies to use a specific format and dictates the type of financial information included in this document.
  • Statement of Comprehensive Income: Showcasing income and business expenses in the Statement of Comprehensive Income helps outsiders get key insights into the financial health of a company. Some countries call this the Profit and Loss Statement instead.
  • Statement of Changes in Equity: Providing data regarding the period-to-period changes in earnings or profit, the Statement of Changes in Equity can also be called the Statement of Retained Earnings.
  • Statement of Cash Flows: By separating cash flow into operations, investing, and financing categories, the Statement of Cash Flows offers a clear look into where a company is putting its funds.

Beyond the financial accounting standards of each financial statement, the IFRS outlines a number of business transactions or opportunities and provides guidance on how companies should handle certain activities in order to stay compliant. For instance:

IFRS 9: financial instruments

IFRS 9 tells public companies how to classify and measure financial assets, financial liabilities, and certain contracts when buying or selling non-financial items. This standard requires companies to use a forward-looking method when assessing losses on financial assets, taking into consideration the expected credit losses over the item’s lifetime.

IFRS 15: revenue from contracts with customer

Focusing on revenue recognition practices, IFRS 15 provides information on how companies should report their income. By mandating that businesses record revenue when they actually deliver the goods and services, IFRS 15 reduces inconsistencies in revenue recognition practices.

IFRS 13: fair value measurement

One of the key global accounting standards regarding fair value measurement, IFRS 13 provides a framework for companies to use when determining the value of their assets and liabilities. It ensures that companies are reporting on the value of these accounts accurately and transparently, in a way that investors and stakeholders can easily understand.

IAS 1: presentation of financial statements

One of the key requirements that was rolled over from the International Accounting Standards, IAS 1 dictates the structure and content of regular financial statements. The statements listed in the section above are the main focal points of this standard.

A full list of requirements that are included in the current International Financial Reporting Standards can be found here. By combining some of the earlier requirements outlined by the International Accounting Standards Board, with updated mandates, the IFRS serves as a comprehensive finance guide for companies.

What’s the difference between IFRS and GAAP?

Because the United States does not follow IFRS, a country-specific set of standards is used instead. With the Financial Accounting Standards Board (FASB) serving in an oversight role, the Generally Accepted Accounting Principles (GAAP) are the set accounting standards used by US-based companies to ensure alignment and transparency within financial reporting practices.

GAAP was initially a response to the stock market crash of 1929, which officials thought was exacerbated by less-than-transparent accounting practices in large companies at the time. GAAP has grown and evolved into what it is today, but it doesn’t fully overlap with the International Financial Reporting Standards used by most countries.

As early as 2008, there was an effort by the US Securities and Exchange Commission (SEC) to converge both sets of standards into one, unified approach to financial accounting, but to this day, that convergence has not been achieved. Harmonizing the frameworks will require compromise from both the International Accounting Standards Board and the Financial Accounting Standards Board, and while both bodies are committed to working together, there have been many hiccups along the way.

At a surface level, GAAP is considered more rules-based while IFRS is more principles-based, giving businesses under IFRS a bit more of an opportunity to interpret the requirements as they see fit and determine how they should be applied. Zooming in to a more detailed view, there are many differences between what GAAP requires and what IFRS mandates, but a few of the key issues are:

  • Treatment of LIFO (Last In, First Out): GAAP allows businesses to use the Last In, First Out inventory methodology, but this practice is prohibited by IFRS.
  • Intangible Assets: The IFRS requires all research costs to be considered expenses, and only allows the capitalization of development costs in rare cases. Using GAAP, businesses expense research costs and capitalize development costs as long as certain criteria are met.
  • Inventory Valuation: GAAP and IFRS are aligned in that they both allow inventory to be written down if the market value for those items drops, but only IFRS gives companies the chance to reverse that devaluation if the market value shoots up. GAAP prohibits the reversal of inventory write-downs.
  • Fixed Assets: When considering long-term assets such as buildings, furniture, or equipment, GAAP requires businesses to value those assets at the historic cost and depreciate the assets from there. The IFRS, however, allows businesses to revalue these assets based on market value.

The pros of International Accounting Standards

Despite a long-standing struggle to get full alignment between IFRS and countries like the US, Japan, and China, having one set of global accounting standards has brought about a period of financial uniformity and alignment that businesses and their stakeholders rely on. Though the list of benefits is long, the benefits topping that list are:

  • Global Comparability: With consistency and comparability as two of the top priorities of IFRS, the set of standards makes it easier for investors, analysts, stakeholders, and other businesses to understand key financial statements and assess the financial performance of companies regardless of their location.
  • Enhanced Transparency: More transparent reporting practices ensure that a company’s public financial reports aren’t covering up business issues or financial challenges. Over time, this creates a safer landscape for consumers and investors.
  • Capital Flow Alignment: Before the International Financial Reporting Standards became commonplace, it was a challenge to monitor the flow of capital across borders. But now, keeping tabs on the movement and goods, services, and money between countries is easier than ever, breaking down investment barriers and rejuvenating economic growth on a global scale.
  • Heightened Capital Opportunities: When most global companies are using the same set of financial metrics and benchmarks, it’s easier for start-ups or growing businesses to capture the eyes of international investors and secure funding from them. More financing opportunities lead to more business opportunities for all.

Ongoing challenges with IFRS

The IFRS have been instrumental in cultivating a globally connected economy. While there are many recognized benefits of these standards and high rates of adoption, the International Accounting Standards Board faces ongoing challenges.

  • Jurisdictional Differences: Despite impressive adoption rates, some countries have only adopted the IFRS in part, or in concurrence with existing national standards, leading to inconsistencies within financial reporting.
  • Complexity and Interpretation: Because of the principles-based approach, IFRS leaves some standards up to interpretation, resulting in different applications of the rules. Again, this can create the very reporting inconsistencies that the International Accounting Standards Board is trying to mitigate in the first place.
  • The Impact of Digital Tools: As more businesses implement digital tools and secure payment platforms like Eftsure, the IFRS will have to account for automation, reporting changes, and new technologies that were not part of the accounting process when these standards were created. Will they need to change or adapt to these tools? Time will tell.


  • International Financial Reporting Standards (IFRS) are global regulations for public companies. They help ensure uniformity, comparability, and transparency across borders.
  • IFRS replaced International Accounting Standards in 2001 and are now adopted by 168 jurisdictions worldwide.
  • While most countries follow IFRS, the US uses Generally Accepted Accounting Principles (GAAP), leading to differences in the treatment of inventory valuation, intangible assets, fixed assets, and more.



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