IFRS fundamentals: the framework, the key standards and what changes when

IFRS Accounting Standards are the financial reporting standards issued by the International Accounting Standards Board (IASB). They're required or permitted for listed companies in a large share of the world's jurisdictions, and many use them for other entities too. If you work in accounting outside the United States, you'll almost certainly work with IFRS — or with a local framework closely based on it.

This guide gives you the map: who sets the standards, the concepts beneath them, which standard covers what, where IFRS differs from US GAAP, and how to stay on top of effective dates.

Who sets IFRS

• The IFRS Foundation is the not-for-profit organisation that oversees the standard-setting boards.
• The IASB develops and issues IFRS Accounting Standards. Older standards issued by its predecessor keep the name IAS; newer ones are numbered IFRS. Both are equally authoritative.
• The IFRS Interpretations Committee issues interpretations (IFRIC) for issues that arise in practice.
• The International Sustainability Standards Board (ISSB), also under the Foundation, issues IFRS Sustainability Disclosure Standards, such as IFRS S1 and IFRS S2 on climate-related disclosures. These are separate from the accounting standards.

Each jurisdiction decides how IFRS becomes law. Some adopt standards as issued by the IASB; others endorse them first (the European Union, for example, applies "EU-adopted IFRS"; Saudi Arabia applies IFRS as endorsed by SOCPA). So "IFRS" in a set of statements always comes with a statement of which version applies.

The Conceptual Framework

The Conceptual Framework for Financial Reporting (revised in March 2018) sets out the concepts the IASB uses to develop standards. It also helps preparers develop accounting policies when no standard applies. It is not a standard and doesn't override one. Its eight chapters cover:

1. The objective of financial reporting — useful information for existing and potential investors, lenders and other creditors making decisions about providing resources to the entity.
2. Qualitative characteristics — the fundamental characteristics are relevance (including materiality) and faithful representation; the enhancing characteristics are comparability, verifiability, timeliness and understandability.
3. The reporting entity and its boundary.
4. The elements — assets, liabilities, equity, income and expenses. In summary, an asset is a present economic resource the entity controls because of past events, and a liability is a present obligation to transfer an economic resource because of past events. Equity is the residual; income and expenses are increases and decreases in assets or liabilities, other than those with owners.
5. Recognition and derecognition — an item is recognised when it meets an element's definition and recognising it gives relevant information and a faithful representation.
6. Measurement — historical cost and current values (fair value, value in use or fulfilment value, and current cost).
7. Presentation and disclosure.
8. Capital and capital maintenance.

The Conceptual Framework lesson applies these definitions to borderline cases.

A map of the key standards

You don't need to memorise paragraphs. You do need to know which standard to open — and how to read it: scope first, then definitions, then the core principle, then the application guidance. The how to read a standard lesson walks through it.

IFRS and US GAAP: headline differences

US GAAP is set by the Financial Accounting Standards Board (FASB) and organised in the Accounting Standards Codification (ASC). The two frameworks have converged on revenue (IFRS 15 and ASC 606 are largely aligned) and moved closer on leases, but real differences remain:

The IFRS versus US GAAP lesson has graded questions on each.

A worked example of a difference: inventory write-down reversal

Calder Instruments holds a batch of sensors that cost 10,000. At 31 December 2026 their net realisable value has fallen to 8,000, so they're written down by 2,000 under both IFRS and US GAAP (for inventory measured at FIFO or average cost). At 31 December 2027 the batch is still unsold, and after a supply shortage its NRV has recovered to 9,500.

Under IFRS the carrying amount returns to the lower of cost (10,000) and the new NRV (9,500), so 1,500 of the write-down is reversed. If NRV had recovered to 12,000, the reversal would be capped at the original 2,000. Under US GAAP the written-down amount is the new cost basis, so nothing is reversed. The same economic facts give 2027 profits that differ by 1,500.

Effective dates: what to watch

Standards and amendments apply from a stated date, usually "annual reporting periods beginning on or after" a given day, often with earlier application permitted. Always check which requirements apply to the period you're reporting.

IFRS 18 in brief

IFRS 18 keeps the four primary statements but changes the income statement significantly:

• Income and expenses are classified into operating, investing, financing, income taxes and discontinued operations categories.
• Two required subtotals: operating profit, and profit before financing and income taxes.
• Management-defined performance measures — subtotals such as "adjusted operating profit" that management uses in public communications — must be disclosed in one note and reconciled to the nearest IFRS subtotal.
• New principles on aggregation and disaggregation, so material information isn't buried in "other" lines.
• The IAS 7 amendments make operating profit the starting point for the indirect cash flow method and fix where most entities classify interest and dividends. See the cash flow statement guide for a worked comparison.

IFRS 18 is applied retrospectively, so comparatives are restated. For a calendar-year company that doesn't adopt early, the 2027 statements are the first under IFRS 18, with 2026 restated. Until then, 2026 IFRS statements follow IAS 1 — so an "operating profit" in a 2026 set isn't yet a defined IFRS subtotal and may be calculated differently from company to company.

Common mistakes

• Treating the Conceptual Framework as a standard that can override a specific requirement.
• Applying a standard before its effective date without electing (and disclosing) early application — or after it, forgetting comparatives.
• Mixing frameworks — for example applying LIFO, or US GAAP impairment tests, in IFRS statements.
• Assuming IFRS is the same everywhere without checking the local endorsement.
• Quoting standards from memory. Paragraphs and scope exceptions matter; open the standard.

Frequently asked questions

Is IFRS principles-based?

Generally more so than US GAAP: it relies on principles plus application guidance, with fewer bright-line rules and industry-specific requirements. That puts more weight on judgement and disclosure.

Do US companies use IFRS?

US domestic registrants file under US GAAP. The US SEC accepts IFRS as issued by the IASB from foreign private issuers without reconciliation to US GAAP.

What's the difference between IFRS and IAS?

Only the era of issue. IAS were issued by the IASB's predecessor and adopted by the IASB; IFRS are issued by the IASB. Both are part of IFRS Accounting Standards.

Practise it

Start with IFRS, US GAAP and local frameworks and the Conceptual Framework, then IFRS versus US GAAP and financial reporting terminology. The standards reference lists the standards each lesson relies on. Apply them in The Revenue Recognition Challenge and The Financial Reporting Review, follow the IFRS financial reporting pathway, and test yourself with the IFRS essentials exam on the exams page.