International Financial Reporting Standards (IFRS) Definition

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on January 11, 2021

Define IFRS In Simple Terms

International Financial Reporting Standards, or IFRS, is a set of accounting standards aiming to provide transparency, accountability, and efficiency to financial markets across the globe.

Adherence to IFRS standards allows for easy apples-to-apples comparisons of the financial state of different companies, and comparisons of the same company at multiple points in time.

What Does IFRS Mean In Finance?

IFRS originated in the European Union to bring consistency to accounting practices across the continent.

It was soon adopted widely by other countries as a kind of universal accounting language, and is currently used by more than 120 countries.

That being said, not all countries use IFRS; the US, for example, instead follows Generally Accepted Accounting Principles, or GAAP.

Since 2002, however, the US based Financial Accounting Standards Board, or FASB, and the EU based International Accounting Standards Board, or IASB, have been working on marrying IFRS and GAAP in response to the increase in companies entering the global market.

IFRS Example

IFRS originated in the European Union to bring consistency to accounting practices across the continent.

It was soon adopted widely by other countries as a kind of universal accounting language, and is currently used by more than 120 countries.

That being said, not all countries use IFRS; the US, for example, instead follows Generally Accepted Accounting Principles, or GAAP.

Since 2002, however, the US based Financial Accounting Standards Board, or FASB, and the EU based International Accounting Standards Board, or IASB, have been working on marrying IFRS and GAAP in response to the increase in companies entering the global market.

While the Securities Exchange Commission, or SEC, has said that it will not adopt IFRS in the US, some economists argue that switching to a more universally recognized system would save money on both duplicative reporting work and the cost of comparing countries internationally.

The SEC has said, however, that it will continue reviewing proposals to allow IFRS information to supplement GAAP reports for US based companies.

In 2007, they also removed the requirement of non-US companies operating within the states to comply with GAAP reporting if they already comply with IFRS.

International Financial Reporting Standards (IFRS) Definition FAQs

IFRS is an acronym for International Financial Reporting Standards.
International Financial Reporting Standards, or IFRS, is a set of accounting standards aiming to provide transparency, accountability, and efficiency to financial markets across the globe.
Not all countries use IFRS; the US, for example, instead follows Generally Accepted Accounting Principles, or GAAP.
GAAP, or (Generally Accepted Accounting Principles), is an alternative to the IFRS that is used in the United States.