IFRS stands for International Financial Reporting Standards. In current use the full name is IFRS Accounting Standards, the body of accounting requirements issued by the International Accounting Standards Board, a standard-setting board of the IFRS Foundation (IFRS Foundation, Who we are).
For a US firm the important part is not what the standards say. It is that they are a different rulebook from US generally accepted accounting principles, they are the rulebook a great many jurisdictions require, and US securities rules name them explicitly in one place and one place only.
The Name Now Covers Two Different Bodies of Standards
This is the distinction most likely to cause a misunderstanding in a conversation, because the umbrella term did not always carry it.
IFRS Accounting Standards are developed by the International Accounting Standards Board. Separately, the IFRS Foundation created the International Sustainability Standards Board, which operates alongside but independently from the accounting board and develops IFRS Sustainability Disclosure Standards (IFRS Foundation, Who we are).
So a client or a colleague who says a subsidiary “reports under IFRS” is almost always talking about the accounting standards. Sustainability disclosure runs under a separate board and a separate set of standards that happen to share the brand.
Why Both IAS and IFRS Numbers Are Still Live
Standards under the accounting arm carry two prefixes, and neither is retired. The older series is IAS, issued by the International Accounting Standards Committee, the predecessor body. The newer series is IFRS, issued by the Board itself. An IAS number is not an obsolete standard waiting to be replaced. It is a current standard with an older name.
One standard shows the whole arrangement on its own cover page. In April 2001 the International Accounting Standards Board adopted IAS 2 Inventories, which had originally been issued by the International Accounting Standards Committee in December 1993, and IAS 2 Inventories replaced an earlier standard on the valuation and presentation of inventories issued in October 1975 (IAS 2 Inventories). The same page records that other standards have since made consequential amendments to it, among them IFRS 13 Fair Value Measurement issued in May 2011, the IFRS 9 Financial Instruments package covering hedge accounting and amendments to IFRS 9, IFRS 7 and IAS 39 issued in November 2013, and IFRS 15 Revenue from Contracts with Customers (IAS 2 Inventories).
Two prefixes and one framework, with standards carrying IFRS numbers reaching back to amend standards carrying IAS numbers. Reading an IAS number as out of date is the practical error this causes.
What US Securities Rules Actually Say About IFRS
The regulation is short, and it names the standards outright rather than leaving them to be inferred. Regulation S-X states the default first: financial statements filed with the Commission which are not prepared in accordance with generally accepted accounting principles will be presumed to be misleading or inaccurate, despite footnote or other disclosures, unless the Commission has otherwise provided (17 CFR 210.4-01(a)(1)).
The exception is drawn for one class of filer, and it has two branches rather than one. In all filings of foreign private issuers, except as stated otherwise in the applicable form, the financial statements may be prepared according to a comprehensive set of accounting principles other than those generally accepted in the United States or International Financial Reporting Standards as issued by the International Accounting Standards Board, if a reconciliation to US generally accepted accounting principles and the provisions of Regulation S-X of the type specified in Item 18 of Form 20-F is also filed as part of the financial statements (17 CFR 210.4-01(a)(2)).
The second branch removes that condition. Alternatively, the financial statements may be prepared according to US generally accepted accounting principles or International Financial Reporting Standards as issued by the International Accounting Standards Board (17 CFR 210.4-01(a)(2)).
Three things follow, and they are worth separating because they get run together.
A foreign private issuer using IFRS as issued by the IASB files no reconciliation to US GAAP. A foreign private issuer using some other national framework, including a local variant of IFRS that is not IFRS as issued by the IASB, files the Item 18 reconciliation. And the phrase “as issued by the International Accounting Standards Board” is doing real work in both branches, because a jurisdiction that has adopted IFRS with local carve-outs has not adopted IFRS as issued by the Board.
Nothing in that provision reaches a domestic issuer, and nothing in it reaches a private company. The rule is about what may be filed with the Commission.
Where a US Firm Actually Meets IFRS
Not through its own filing obligation. It meets IFRS through a client with a foreign parent, a foreign lender or an IFRS reporting package, and through people: a preparer trained under a different framework brings a different instinct about which treatment is even permitted, and that instinct reaches the workpaper before anyone raises the subject.
Which differences still move a number in a US firm’s files, why a LIFO election is a tax question before it is a reporting question, and how the write-down reversal windows differ, are worked through in GAAP vs IFRS. The US framework itself, and the source that makes it authoritative, is in GAAP.
Specific measurement differences that carry IFRS treatment already sit in the glossary: net realizable value, cash generating units, impairment losses, revaluation and weighted average cost method.
Common Questions
A single set of accounting standards, issued by the International Accounting Standards Board, that companies in many countries use to prepare financial statements, so that statements from different countries can be read against each other (IFRS Foundation, Who we are).
Not by domestic issuers. Financial statements filed with the Commission that are not prepared in accordance with generally accepted accounting principles are presumed misleading or inaccurate unless the Commission has provided otherwise (17 CFR 210.4-01(a)(1)). Foreign private issuers may file under IFRS as issued by the IASB, and when they do they file no US GAAP reconciliation (17 CFR 210.4-01(a)(2)).
They are two naming series inside one framework. IAS standards came from the International Accounting Standards Committee and were taken over by the Board; IFRS standards were issued by the Board itself. Both are current, and standards in each series amend standards in the other, which the front matter of IAS 2 shows on a single page (IAS 2 Inventories).
No, and the securities rule is built around that fact. It distinguishes IFRS as issued by the International Accounting Standards Board from other comprehensive sets of accounting principles, and only the former escapes the reconciliation requirement (17 CFR 210.4-01(a)(2)). A jurisdiction that adopts the standards with carve-outs produces something that is not IFRS as issued by the Board.
Accountably places trained offshore accountants and tax preparers inside US CPA and EA firms, and a firm can put a real block of its own review work through a trial task before a client file depends on it.
