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Accounting terms explained in a simple way

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IFRS Standards- What are the IFRS Standards?

The International Financial Reporting Standards, usually called the IFRS Standards or IFRSs, are a set of international accounting standards which state how certain kinds of transactions or events should be reported in financial statements.

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Originating in the European Union, the IFRS Standards were created to make accounts more easily accessible across the continent by establishing a common accounting language. The IFRS Standards have since spread globally and now play an important role in the on-going process of synchronising accounting standards around the world.

The IFRS Standards are issued and maintained by the IFRS Foundation, replacing the international Accounting Standards (IASs) in 2001.

IFRS Standards around the world

Though the IFRS Standards were developed in Europe, they are no longer a regional concept and are used by around 120 countries across the world.

The IFRS Standards are progressively replacing national accounting standards in many different countries and are most beneficial to those which do a lot of international trade or investing. However, several major countries – including the United States - are still deciding whether or not to adopt the standards.

IFRS Standards have limited scope in the UK. Although EU-wide laws on financial reporting mean that all listed companies in the EU must use IFRS Standards, certain UK organisations are exempt from this rule. In the UK, the most widely used accounting standards are the UK GAAP and there is ongoing work to align the two sets of standards.

IFRS Standards for SMEs

The IRFS Foundation provides an extensive list of international accounting standards, but these standards are often irrelevant or too complex for small businesses. Instead, the IRFS Foundation has created the IFRS for SMEs Standard , which is simplified in five ways from full IFRS Standards:

  • some topics in full IFRS Standards have been removed because they are not relevant to small businesses;
  • some accounting policy options in full IFRS Standards are not allowed because small businesses can use a simpler method;
  • many of the principles that are in full IFRS Standards have been simplified;
  • small businesses are required to submit less disclosures;
  • the text of full IFRS Standards is redrafted in a more simplified and accessible way.