International Financial Reporting Standards


International Financial Reporting Standards are accounting standards issued by the IFRS Foundation and the International Accounting Standards Board. They constitute a standardised way of describing a company's financial performance and position so that company financial statements are understandable and comparable across international boundaries. They are particularly relevant for companies with publicly listed shares or securities.
IFRS have replaced many different national accounting standards around the world but have not replaced the separate accounting standards in the United States, where US GAAP is applied.

History

The International Accounting Standards Committee was established in June 1973 by accountancy bodies representing ten countries. It devised and published International Accounting Standards, interpretations and a conceptual framework. These were looked to by many national accounting standard-setters in developing national standards.
In 2001, the International Accounting Standards Board replaced the IASC with a remit to bring about convergence between national accounting standards through the development of global accounting standards. During its first meeting the new Board adopted existing IAS and Standing Interpretations Committee standards. The IASB has continued to develop standards, calling the new standards "International Financial Reporting Standards".
In 2002, the European Union agreed that, from 1 January 2005, International Financial Reporting Standards would apply for the consolidated accounts of EU-listed companies, bringing about the introduction of IFRS to many large entities. This integration subjects the definitive legal interpretation of the standards within the EU to the authority of the European Court of Justice, acting in cooperation with national courts. Other countries have since followed the lead of the EU.
In 2021, on the occasion of COP26 of the United Nations Framework Convention on Climate Change in Glasgow, the IFRS Foundation announced the formation of the new International Sustainability Standards Board, ISSB.

Adoption

IFRS Standards are required or permitted in 169 jurisdictions across the world, including major countries and territories such as Australia, Brazil, Canada, Chile, the European Union, GCC countries, Hong Kong, India, Israel, Malaysia, Pakistan, Philippines, Russia, Singapore, South Africa, South Korea, Taiwan, and Turkey. Out of 169 total jurisdictions surveyed, Europe and Africa represent the largest regions for IFRS adoption, with the highest requirement rates where 43 of 44 European jurisdictions and 37 of 40 African jurisdictions mandate IFRS Accounting Standards for all or most domestic publicly accountable entities, followed by the Americas, Asia and Oceania, and the Middle East. The IAS regulation and successive amendments include: 25 IAS ranging from presentation of financial statements to borrowing costs and intangible assets, 18 international financial reporting standards on subjects such as business combinations and insurance contracts, 15 interpretations from the International Financial Reporting Interpretations Committee covering, among others, rights to interests from decommissioning, restoration and environmental rehabilitation funds, 5 interpretations by the Standard Interpretations Committee, including the introduction of the euro and government assistance.
To assess progress towards the goal of a single set of global accounting standards, the IFRS Foundation has developed and posted profiles of the use of IFRS Standards in individual jurisdictions. These are based on information from various sources, with the starting point being the responses provided by standard-setting and other relevant bodies to a survey that the IFRS Foundation conducted. As of May 2025, profiles are completed for 169 jurisdictions, with 169 jurisdictions requiring the use of IFRS Standards.
Due to the difficulty of maintaining up-to-date information in individual jurisdictions, three sources of information on current worldwide IFRS adoption are recommended:
Ray J. Ball described the expectation by the European Union and others that IFRS adoption worldwide would be beneficial to investors and other users of financial statements, by reducing the costs of comparing investment opportunities and increasing the quality of information. Companies are also expected to benefit, as investors will be more willing to provide financing. Companies that have high levels of international activities are among the group that would benefit from a switch to IFRS Standards. Companies that are involved in foreign activities and investing benefit from the switch due to the increased comparability of a set accounting standard. However, Ray J. Ball has expressed some scepticism of the overall cost of the international standard; he argues that the enforcement of the standards could be lax, and the regional differences in accounting could become obscured behind a label. He also expressed concerns about the fair value emphasis of IFRS and the influence of accountants from non-common-law regions, where losses have been recognised in a less timely manner.

US Generally Accepted Accounting Principles

, commonly called US GAAP, remains separate from IFRS. The Securities Exchange Committee requires the use of US GAAP by domestic companies with listed securities and does not permit them to use IFRS; US GAAP is also used by some companies in Japan and the rest of the world.
In 2002 IASB and the Financial Accounting Standards Board, the body supporting US GAAP, announced a programme known as the Norwalk Agreement that aimed at eliminating differences between IFRS and US GAAP. In 2012 the SEC announced that it expected separate US GAAP to continue for the foreseeable future but sought to encourage further work to align the two standards.
IFRS is sometimes described as principles-based, as opposed to a rules-based approach in US GAAP; in US GAAP there is more instruction in the application of standards to specific examples and industries.

Conceptual Framework for Financial Reporting

The Conceptual Framework serves as a tool for the IASB to develop standards. The European Commission assessed in 2003 that endorsing the Conceptual Framework was unnecessary because the main standard, IAS 1 Presentation of Financial Statements, already ensured a fair presentation. It does not override the requirements of individual IFRSs. Some companies may use the Framework as a reference for selecting their accounting policies in the absence of specific IFRS requirements.

Chapter 1: Objective of general purpose financial reporting (CF 1.1–1.25)

The Conceptual Framework states that the primary purpose of financial information is to be useful to existing and potential investors, lenders and other creditors when making decisions about providing resources to the entity . Decisions include buying, selling or holding equity and debt instruments, and exercising rights to vote on management's actions that affect the use of the entity's economic resources.
Users base their expectations of returns on their assessment of:
  • The amount, timing and uncertainty of future net cash inflows to the entity ;
  • Management's stewardship of the entity's economic resources .

    Chapter 2: Qualitative characteristics of useful financial information (CF 2.1–2.39)

The Conceptual Framework defines the fundamental qualitative characteristics that make financial information useful to users:
  • Relevance: Information is relevant if it is capable of making a difference in the decisions made by users .
  • Faithful representation: To be useful, information must faithfully represent the economic phenomena it purports to represent, being complete, neutral, and free from error .
The Framework also describes the following enhancing qualitative characteristics :
  • Comparability: Enables users to identify and understand similarities in, and differences among, items .
  • Verifiability: Helps assure users that information faithfully represents the economic phenomena it purports to represent .
  • Timeliness: Having information available to decision-makers in time to be capable of influencing their decisions .
  • Understandability: Classifying, characterizing and presenting information clearly and concisely .

    Chapter 3: Financial Statements and the Reporting Entity (CF 3.1–3.14)

Chapter 3 describes the objective and scope of financial statements and the characteristics of the reporting entity:
  • Objective and scope: Financial statements provide information about assets, liabilities, equity, income, and expenses that is useful in assessing future net cash inflows and management's stewardship .
  • Reporting period: Financial statements provide comparative information for at least one preceding reporting period .
  • Going concern assumption: Financial statements are normally prepared on the assumption that the entity will continue in operation for the foreseeable future .
  • The reporting entity: An entity that is required, or chooses, to prepare financial statements. It can be a single entity or comprise more than one entity .
  • Boundary of a reporting entity: Determined by the information needs of the users, often driven by a control relationship .

    Chapter 4: Elements of financial statements (CF 4.1–4.72)

The Conceptual Framework defines the elements of financial statements to be:
  • Asset: A present economic resource controlled by the entity as a result of past events . An economic resource is a right that has the potential to produce economic benefits .
  • Liability: A present obligation of the entity to transfer an economic resource as a result of past events .
  • Equity: The residual interest in the assets of the entity after deducting all its liabilities .
  • Income: Increases in assets, or decreases in liabilities, that result in increases in equity, other than those relating to contributions from holders of equity claims .
  • Expenses: Decreases in assets, or increases in liabilities, that result in decreases in equity, other than those relating to distributions to holders of equity claims .