IFRS Accounting Standard

As the world is gradually turning into a global village, international trade has grown multifold. But as the trading borders continue to widen into the global marketplace, it has become increasingly difficult for companies to present their financial statements according to the reporting standards of each country it transacts in.

As a result, IASB (International Accounting Standards Board), a London-headquartered independent body, introduced IFRS (International Financial Reporting Standards).

What is IFRS?

IFRS can be defined as accounting rules entities should follow to report their financial statements. The international standards are created with the view to enhance transparency and credibility in the corporate landscape, enabling investors and other parties involved to make improved financial decisions.

As the IFRS is the common language used by entities across countries, it has helped make the interpretation of financial statements more convenient on a global scale. In fact, more than 100 countries across the world have adopted the IFRS accounting standards. However, it is yet to be made the official accounting standard in the USA.

What are the Current Account Reporting Standards?

IASB is the successor of the IASC (International Accounting Standards Committee). Before IASB, IASC was responsible for establishing and maintaining accounting standards. So, the IASC had already issued some accounting standards, known as IAS (International Accounting Standards), between 1973 and 2001.

Currently, both IFRS and IAS accounting standards are in force. Here’s a quick overview of the accounting standards-

IFRS Standards

Standard No.Standard Title
IFRS 1First-Time Adoption of IFRS
IFRS 2Share-based Payment
IFRS 3Business Combinations
IFRS 4Insurance Contracts
IFRS 5Non-current Assets Held for Sale and Discontinued Operations
IFRS 6Exploration For and Evaluation of Mineral Resources
IFRS 7Financial Instruments: Disclosures
IFRS 8Operating Segments
IFRS 9Financial Instruments
IFRS 10Consolidated Financial Statements
IFRS 11Joint Arrangements
IFRS 12Disclosure of Interests in Other Entities
IFRS 13Fair Value Measurement
IFRS 14Regulatory Deferral Accounts
IFRS 15Revenue from Contracts with Customers
IFRS 16Leases
IFRS 17Insurance Contracts

IAS Standards

Standard No.Standard Title
IAS 1Presentation of Financial Statements
IAS 2Inventories
IAS 7Statement of Cash Flows
IAS 8Accounting Policies, Changes in Accounting Estimates and Errors
IAS 10Events after the Reporting Period
IAS 12Income Taxes
IAS 16Property, Plant and Equipment
IAS 19Employee Benefits
IAS 20Government Grants and Disclosure of Government Assistance
IAS 21The Effects of Changes in Foreign Exchange Rates
IAS 23Borrowing Costs
IAS 24Related Party Disclosures
IAS 26Accounting and Reporting by Retirement Benefit Plans
IAS 27Separate Financial Statements
IAS 28Investments in Associates and Joint Ventures
IAS 29Financial Reporting in Hyperinflationary Economies
IAS 32Financial Instruments: Presentation
IAS 33Earnings Per Share
IAS 34Interim Financial Reporting
IAS 36Impairment of Assets
IAS 37Provisions, Contingent Liabilities and Contingent Assets
IAS 38Intangible Assets
IAS 39Financial Instruments: Recognition and Measurement
IAS 40Investment Property
IAS 41Agriculture

How are Financial Statements Created Under IFRS?

How are Financial Statements Created Under IFRS?

The financial statements complying with the IFRS standards generally include the following components-

  • Statement of Financial Position- It is commonly known as the balance sheet and shows the entity’s financial position at the end of a specific period. The IFRS has rules regarding reporting the components of a balance sheet.
  • Statement of Comprehensive Income- It is a profit and loss statement for the period. It also includes other comprehensive income, including income/expense components not reported in the profit and loss statement in compliance with other standards.
  • Statement of Changes in Equity- More commonly known as a retained earnings statement, it provides information regarding changes in the entity’s profit or earnings in a certain period.
  • Statement of Cash Flows- A detailed summary of an entity’s financial transactions for a certain period. Cash flows like investing, financing, and operations are separately mentioned in the statement.

Apart from the reports listed above, entities should also provide a detailed summary of the accounting policies it follows. Moreover, if the entity has subsidiaries, individual account reports should be presented for each of them.

Who Should Use the IFRS Accounting Standards?

Public companies located in all 27 countries of the European Union should use the IFRS accounting standards. Apart from the EU, the standards have also been adopted by countries like Russia, Canada, South Africa, Chile, and India. However, China and the USA use different accounting standards of their own.


As mentioned above, the USA has not adopted IFRS. Instead, USA-based public companies must report their financial statements as per the Generally Accepted Accounting Principles (GAAP).

While the IFRS and GAAP share several similarities, there are some significant differences too. For instance, GAAP standards are stringent with regard to revenue definition, whereas IFRS is more flexible. It is also worth noting an IFRS-based balance sheet can show a higher revenue stream than a balance sheet created using GAAP.

Moreover, even the expense reporting requirements are different between IFRS and GAAP. For instance, in IFRS, the money spent by an entity on development or future investments is allowed to be capitalized. But with GAAP, all such spending should be mandatorily reported as expenses.

What is the Importance of IFRS?

What is the Importance of IFRS?

As IFRS enhances transparency in company accounting, the international financial markets, along with the entities that are listed on them, are the biggest beneficiaries. It is due to a global accounting standard like IFRS that investors trust the financial statements reported by the companies. If the trust was lacking, economies would have been less robust, and international transactions would have been fewer.

Moreover, equity investors abundantly rely on the financial statements of the companies to compare them to their peers and analyze their fundamentals before making an investment decision.

Global Financial Markets Made More Credible with IFRS

The IFRS standards are a set of accounting rules relied upon by global companies to report their financial statements.

The uniform standards help make company statements transparent and consistent. It also makes reporting easier for entities with operations spread across countries and enables investors to analyze potential investment opportunities effectively. Apart from investing, the IFRS standards also play a vital role in tax purposes and auditing.