Glossary term
International Financial Reporting Standards (IFRS)
Subject: Legal, Tax and Reporting, Financial Reporting and Audit
Also known as: IFRS Accounting Standards
International Financial Reporting Standards are accounting standards issued by the International Accounting Standards Board and used by companies in many countries, so that financial statements can be compared across borders.
Explanation
The IASB, part of the IFRS Foundation, writes the standards. Some older ones carry the label IAS and still apply. Well over a hundred jurisdictions require or allow IFRS for listed companies. The standards are principles-based and leave room for judgment. Well-known ones cover financial instruments and impairment (IFRS 9), fair value (IFRS 13), revenue (IFRS 15) and leases (IFRS 16). Each country adopts them through its own process, sometimes with changes. The European Union endorses them for listed groups, and India’s Ind AS follows them closely but not word for word. The United States does not allow its domestic listed companies to use IFRS. Sustainability disclosure standards from the ISSB now sit beside the accounting standards. For preparers, IFRS drives systems and group consolidation; for investors it lets a firm in one country be read against peers elsewhere.
Example
A multinational with subsidiaries in six countries used six local accounting frameworks, and consolidation took weeks of manual adjustments. When the group adopts IFRS, every subsidiary reports on the same policies through one chart of accounts. Consolidation speeds up, investors can compare margins with foreign competitors, and the auditors apply one set of standards across the group.
Not to be confused with
- International Standards on Auditing (ISA)
- IFRS tells companies how to prepare accounts. ISA tells auditors how to audit them.