A Comprehensive IFRS Standards List Explained

International Financial Reporting Standards (IFRS) are a set of accounting rules for the financial statements of public companies, issued by the International Accounting Standards Board (IASB). The standards aim to create a common accounting language to make financial statements consistent, transparent, and comparable worldwide. This allows investors, analysts, and other stakeholders to compare the financial performance of companies across different countries, fostering international business and investment.

Core Framework and Presentation Standards

The foundation of IFRS is the Conceptual Framework for Financial Reporting, which sets out the core concepts that guide the IASB in developing standards. It defines the objective of financial reporting, the characteristics of useful information, and the criteria for assets, liabilities, equity, income, and expenses. The framework ensures all standards are based on consistent principles, which helps in creating policies where no specific standard exists and in interpreting the standards.

IFRS 1 First-time Adoption of International Financial Reporting Standards guides companies transitioning to IFRS. It requires a company to prepare a complete set of financial statements for its first IFRS reporting period, including comparative information for the preceding year. These statements must use consistent accounting policies that comply with all effective standards at the reporting date. IFRS 1 offers limited exemptions from full retrospective application to avoid excessive costs.

IAS 1 Presentation of Financial Statements prescribes the structure and minimum content for financial statements to ensure comparability. It establishes guidelines for fair presentation, going concern, the accrual basis of accounting, and materiality. IAS 1 requires a complete set of financial statements, including:

• A statement of financial position
• A statement of profit or loss and other comprehensive income
• A statement of changes in equity
• A statement of cash flows
• Accompanying notes

This standard will be replaced by IFRS 18 Presentation and Disclosure in Financial Statements for annual periods beginning on or after January 1, 2027.

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors provides criteria for selecting and changing accounting policies. Any change must be required by an IFRS or result in more reliable and relevant information. The standard distinguishes between changes in accounting policies, which are applied retrospectively, and changes in accounting estimates, which are applied prospectively. Material prior period errors must also be corrected retrospectively by restating comparative amounts.

Standards for Assets and Impairment

IAS 2 Inventories addresses the accounting for inventory. It requires inventories to be measured at the lower of their cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and costs to make the sale.

IAS 16 Property, Plant and Equipment (PPE) covers tangible, long-term assets. It requires initial recognition of PPE at its cost, including the purchase price and costs to get the asset ready for use. Subsequently, an entity must choose a measurement model for an entire class of PPE. The options are the cost model (cost less accumulated depreciation and impairment) or the revaluation model (fair value less subsequent depreciation and impairment).

IAS 38 Intangible Assets governs assets like patents and software. An intangible asset is recognized only if it is identifiable, the entity has control over it, and it is probable that future economic benefits will flow to the entity. Internally generated items like brands and customer lists are not recognized as assets. After initial recognition at cost, intangible assets are amortized over their useful life, unless that life is indefinite.

IAS 40 Investment Property covers property held to earn rental income or for capital appreciation, rather than for use or sale in ordinary business. Similar to IAS 16, entities can choose between a cost model and a fair value model. Under the fair value model, the property is remeasured to fair value at each reporting date, with changes recognized in profit or loss.

IAS 36 Impairment of Assets ensures assets are not carried at more than their recoverable amount. An asset’s carrying amount cannot exceed its recoverable amount, defined as the higher of its fair value less costs of disposal and its value in use. An impairment test is required when there is an indication of impairment, such as a significant decline in market value. Goodwill and intangible assets with indefinite useful lives must be tested for impairment annually.

Standards for Revenue, Leases, and Financial Instruments

IFRS 15 Revenue from Contracts with Customers

IFRS 15 provides a five-step model for recognizing revenue from all customer contracts. The model ensures revenue depicts the transfer of goods or services for the expected consideration. The five steps are:

• Identify the contract with the customer.
• Identify the distinct performance obligations in the contract.
• Determine the transaction price.
• Allocate the transaction price to the performance obligations.
• Recognize revenue when (or as) the entity satisfies a performance obligation.

A performance obligation is a promise to transfer a distinct good or service. For example, a contract for a mobile phone and a two-year service plan contains two performance obligations: the handset and the network service. The transaction price is allocated between these two items. Revenue for the phone is recognized at the point of sale, while revenue for the service is recognized over the two-year term.

IFRS 16 Leases

IFRS 16 changed lease accounting for lessees by removing the distinction between finance and operating leases. Previously, operating leases were kept off the balance sheet, obscuring a company’s financial obligations. IFRS 16 corrects this by requiring lessees to recognize assets and liabilities for nearly all leases.

A lessee must recognize a “right-of-use” asset (its right to use the leased asset) and a lease liability (its obligation to make payments). The lease liability is measured at the present value of the lease payments. This approach provides greater transparency into a company’s lease commitments. Exceptions exist for short-term leases of 12 months or less and leases of low-value assets.

IFRS 9 Financial Instruments

IFRS 9 covers the accounting for financial instruments in three areas: classification and measurement, impairment, and hedge accounting. It replaced IAS 39 to simplify the accounting and address issues identified during the financial crisis.

Classification and Measurement

Financial assets are classified into one of three measurement categories based on the entity’s business model and the asset’s contractual cash flows. The categories are amortized cost, fair value through other comprehensive income (FVOCI), and fair value through profit or loss (FVTPL). For example, a simple loan held to collect payments is measured at amortized cost, while an equity investment held for trading is measured at FVTPL.

Impairment

IFRS 9 introduced the “expected credit loss” (ECL) impairment model, replacing the previous “incurred loss” model. The forward-looking ECL model requires entities to recognize a loss allowance for expected credit losses when a financial instrument is acquired, rather than waiting for a loss event. The model includes a general approach that recognizes 12-month or lifetime expected losses depending on credit risk, and a simplified approach for items like trade receivables that always recognizes lifetime expected losses.

Hedge Accounting

The hedge accounting section of IFRS 9 is designed to better align accounting treatment with an entity’s risk management activities. It uses a principles-based approach that allows more strategies to qualify for hedge accounting. This helps companies reflect how they use financial instruments to manage exposures to risks like interest rate or foreign currency fluctuations.

Standards for Liabilities and Equity

IAS 37 Provisions, Contingent Liabilities and Contingent Assets addresses liabilities with uncertain timing or amount. A provision is recognized only when three criteria are met: a present obligation exists from a past event, an outflow of resources is probable, and the amount can be reliably estimated. If these conditions are not met, the obligation is a contingent liability, which is disclosed in the notes but not recognized on the balance sheet.

IAS 19 Employee Benefits prescribes the accounting for all forms of employee compensation, from salaries to pensions. The cost of providing benefits is recognized in the period the service is rendered, not when the benefit is paid. For defined contribution plans, the expense is the contribution payable for the period. Defined benefit plans require complex actuarial calculations to measure the obligation and expense.

IFRS 2 Share-based Payment applies when a company pays for goods or services with its own shares or stock options. These transactions must be recognized as an expense. The transaction is measured at the fair value of the goods or services received or, if that cannot be estimated, at the fair value of the equity instruments granted. For employee transactions, the expense is recognized over the vesting period.

Standards for Group Accounting

IFRS 3 Business Combinations covers the accounting for business acquisitions using the “acquisition method.” This method requires identifying the acquirer, determining the acquisition date, and recognizing the acquired assets and liabilities at their fair values. Any excess of the purchase price over the fair value of the net assets acquired is recognized as goodwill.

IFRS 10 Consolidated Financial Statements establishes control as the basis for consolidation. An investor controls an investee when it has power over the investee, exposure to variable returns, and the ability to use its power to affect those returns. If control exists, the parent entity must present consolidated financial statements. These statements present the parent and its subsidiaries as a single economic entity, with intercompany transactions and balances eliminated.

IFRS 11 Joint Arrangements covers arrangements where two or more parties have joint control. These are classified as either joint operations or joint ventures based on the parties’ rights and obligations. In a joint operation, parties have rights to assets and obligations for liabilities. In a joint venture, parties have rights to the net assets. Joint operations require recognizing a share of assets and liabilities, while joint ventures are accounted for using the equity method.

IFRS 12 Disclosure of Interests in Other Entities requires disclosures about an entity’s interests in subsidiaries, joint arrangements, and associates. These disclosures help users evaluate the nature of, and risks associated with, these interests. This includes revealing the judgments and assumptions made in determining control or joint control.