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A Complete Guide to International Financial Reporting Standards (IFRS)

Posted by Devayani Bapat

February 22, 2024

Your one-stop shop for everything you need to know about IFRS.

Can you imagine a cross-border merger and acquisition between companies with differing reporting processes? It would give the accountants responsible for tallying all those financials nothing short of a massive nightmare. That’s where the IFRS or International Financial Reporting Standards step in to help these highly burdened back-office workers. 

The IASB (International Accounting Standards Board) issued the IFRS, a set of accounting rules standardized across companies of 167 different jurisdictions. 

Unfortunately, unlike when we travel to foreign lands, companies cannot use Google Translate to simplify financials across countries, and the IFRS helps set one uniform accounting language that makes cross-border collaborations a cakewalk to navigate.

Before we dive into all the relevant updates about the IFRS for the time to come, let’s get a little acquainted, shall we?

Here’s a quick #gettoknowme tag with IFRS. 

Q. What am I?

A. Hello, I am IFRS. If you spell that out, it stands for International Financial Reporting Standards. I am a uniform guide, friend, and philosopher who tells companies how they must maintain their records and disclose their expenses. I am that universal language, the Lingua Franca of the financial reporting world understood and spoken by auditors, investors, and government officials globally.

Q. What am I not?

A. I am often mistaken to be my friend IAS, International Accounting Standards; however, that guy was around before me. I replaced the IAS in 2001 to make way for a more accessible one-size-fits-all approach to International Financial Reporting.

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Q. What is my purpose?

A. I am IFRS, a globally accepted accounting standard for public company financial statements, aiming to ensure consistency, transparency, and comparability worldwide. I aim to provide a universal accounting framework that allows investors, auditors, regulators, and other stakeholders to be bound by one love language – financial reporting standards. To ensure consistency, my guidelines have been issued by the International Accounting Standards Board.

Q. How am I different from GAAP?

A. In financial reporting, two central systems strive for clarity and integrity: IFRS (that’s me) and GAAP. Listed below are some stand-out differences between us; take a look:



A flexible, principle-based approach, applicable worldwide and not yet integrated into the US financial system

A stricter rules-based system relevant to the US only

Fundamentally and methodologically different: 

IFRS prohibits Last In, First Out (LIFO).

Fundamentally and methodologically different: 

GAAP allows companies to use two inventory costing methods – First In, First Out (FIFO) or Last In, First Out (LIFO).


Why am I important?

In the chaotic world of global finance, I am the guardian of transparency and trust. It is IFRS standards that are necessary for investors to be able to take companies at their word. If not for them, deals would never close, and finance would be untrustworthy. But fret not! I’ve made it easy for investors to size up companies with clear, consistent standards. Think of me as the secret sauce for savvy financial analysis, allowing for ‘apples to apples’ comparisons and insights into company performance. 

The past

First born in 2001, the IFRS originated in the EU and slowly yet steadily spread globally, becoming a universal accounting language. It was first set up to streamline business affairs and accounting practices across the continent. However, today, it is accepted by 167 jurisdictions globally. However, the US has its own accounting principles system.

The Future: Keeping up with…not the Kardashians 

Effective as of January 1, 2024, the IASB issued amendments to the IFRS that encompass changes made to five Accounting Standards, covering a range of crucial topics, including the classification of liabilities, lease liabilities in sale and leaseback arrangements, non-current liabilities with covenants, supplier finance arrangements, and the International Tax Reform—Pillar Two Model Rules. The changes are as follows:

1. Classification of Liabilities as Current and Non-current:

This clarifies the criteria in IAS 1 Presentation of Financial Statements for labeling a liability as non-current, requiring an entity, for at least 12 months after the reporting period, to have the right to defer settlement.

2. Lease Liability in a Sale and Leaseback:

Amendments to IFRS 16 introduce successive measurement requirements for sale and leaseback transactions, providing clarity and a more streamlined modus operandi in lease accounting. 

3. Non-current Liabilities with Covenants:

Amendments to IAS 1 Presentation of Financial Statements enhance disclosure requirements when a liability’s settlement deferral relies on compliance with covenants, addressing stakeholder concerns about its classification. 

4. Supplier Finance Arrangements: 

Changes to IAS 7 Statement of Cash Flows mandate additional disclosures on supplier finance arrangements, incorporating them into liquidity risk disclosures under IFRS 7 Financial Instruments: Disclosures. 

5. International Tax Reform—Pillar Two Model Rules:

Amendments to IAS 12 Income Taxes introduce a temporary exception to recognize and disclose deferred tax assets and liabilities related to Pillar Two income taxes, alongside targeted disclosure requirements for affected entities, showcasing the evolving nature of international tax regulations.

6. Lack of exchangeability:

This amendment looks at IAS 21, The Effects of Changes in Foreign Exchange Rates, by making entities stick to a consistent method for deciding if one currency can turn into another. It’s all about picking the correct exchange rate and dishing out disclosures. This amendment is effective as of January 01, 2025.

Since its debut, the IFRS has been revolutionizing accounting practices worldwide. It has effectively brought transparency, comparability, and economic efficiency to financial markets across the globe, turning out to be that reliable accounting language ruling the roost. While some challenges exist with implementing and adopting the IFRS, the pros of having a uniform accounting language outweigh the cons and are immensely practical.

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Want to know more? Escalon has helped over 5,000 companies across a range of industries improve their compliance regarding internal controls and streamline processes. Talk to an expert today.


Devayani Bapat
Devayani Bapat

With 6 years of experience in copywriting and social media management across genres, Devayani's heart lies with weaving words into stories and visuals into carefully crafted narratives that’ll keep you wanting more. She carries with her, her pocket notebook, a trusted confidante that goes with her wherever she goes, and scribbles down into it anecdotes on the go. Her secret weapon for keeping all things copy interesting! Apart from writing, Devayani is huge on travelling. You'll find her booking her next adventure while she's on her current one. And while on those adventures, you'll find her devouring true crime books one after the other. Whether it's a low down on a recent case or one that occurred 70 years ago, she can cook up a story narration you'll never forget.

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