International Financial Reporting Standards (IFRS) are the accounting standards issued by the International Accounting Standards Board (IASB), used in over 140 countries [citation needed]. IFRS provides a common accounting language so that financial statements are comparable and transparent across national borders.
IFRS and GAAP share the same goal — comparable, transparent financial reporting — but differ in how they get there. IFRS is more principles-based: it sets broad objectives and leaves professional judgment to fill in the details. GAAP is more rules-based, with detailed guidance for specific situations. In practice, this means IFRS gives preparers more flexibility, which can be an advantage (adaptability to unusual transactions) or a drawback (less consistency across companies). Key differences show up in areas like inventory costing (IFRS doesn’t allow LIFO), lease classification, and development cost capitalization.
The IASB and FASB have pursued convergence for years, producing joint standards on revenue recognition (IFRS 15 / ASC 606) and leases (IFRS 16 / ASC 842). These efforts have narrowed the gap between the two frameworks, but full convergence remains incomplete. The United States hasn’t adopted IFRS for domestic filers, though the SEC permits foreign private issuers to file IFRS-based statements without reconciliation to GAAP.
Related terms
- GAAP — the U.S. accounting standards framework, maintained by FASB
- Financial statements — the reports that IFRS governs
- Accrual accounting — the basis of measurement that both IFRS and GAAP require