IFRS (International Financial Reporting Standards)
Understand what IFRS means, what the standards cover, and how they apply in Hong Kong through HKFRS.
Published Thursday 6 August 2026
Table of contents
Key takeaways
- IFRS (International Financial Reporting Standards) are globally recognised accounting rules that make financial statements consistent, comparable and credible across borders.
- Hong Kong applies Hong Kong Financial Reporting Standards (HKFRS), which have been converged with IFRS since 2005 and are virtually identical in wording.
- IFRS is principles-based, offering flexibility in application, while US GAAP is rules-based and more prescriptive.
- Preparing HKFRS-compliant accounts can help your business build trust with investors and lenders while simplifying cross-border trade and capital raising.
What is IFRS?
IFRS (International Financial Reporting Standards) are a set of accounting rules for how financial information is gathered and presented in financial reports, creating a common accounting language so statements are consistent, comparable and credible worldwide. These standards govern financial reporting for listed companies and financial institutions in most major economies.
IFRS Accounting Standards are required or permitted in over 160 jurisdictions, with around 140 requiring them for all or most listed companies and financial institutions. This global adoption means businesses that follow IFRS can present their accounts to investors, partners and regulators around the world with confidence.
Who sets IFRS standards?
IFRS standards are issued and maintained by the International Accounting Standards Board (IASB), an independent body of accounting experts. The IASB sits within the IFRS Foundation, a not-for-profit organisation based in London.
The Foundation oversees governance and funding, while the IASB focuses on developing and updating the standards themselves. This structure keeps standard-setting independent from commercial or political influence, helping maintain the credibility of IFRS worldwide.
What do IFRS standards cover?
IFRS standards set out how to prepare and present financial statements so they give a true and fair view of a business. Under IAS 1, a complete set of financial statements includes:
- statement of financial position (balance sheet)
- statement of comprehensive income (profit and loss)
- statement of changes in equity
- statement of cash flows
- notes to the accounts
Comparative information must be presented at least annually, allowing readers to track changes over time. The standards are a numbered series, with the most recent being IFRS 18 and IFRS 19, both issued in 2024. These sit alongside the older International Accounting Standards (IAS) that remain in force.
IFRS vs GAAP: what is the difference?
IFRS is principles-based, meaning it sets broad objectives and allows professional judgement in how you apply them to specific situations. US GAAP (Generally Accepted Accounting Principles) is rules-based, providing detailed, prescriptive guidance for many transactions.
The United States uses GAAP for domestic companies. However, the US Securities and Exchange Commission allows foreign companies listed on US exchanges to file using IFRS. Understanding these differences matters if your Hong Kong business deals with US partners or investors, or if you're comparing accounts prepared under each framework.
IFRS in Hong Kong (HKFRS)
Hong Kong applies Hong Kong Financial Reporting Standards (HKFRS), issued by the Hong Kong Institute of Certified Public Accountants (HKICPA). HKFRS have been converged with IFRS since 1 January 2005 and are virtually identical in wording, making Hong Kong accounts recognisable to international investors and regulators.
Full HKFRS compliance is mandatory for companies listed on the Stock Exchange of Hong Kong. For smaller businesses, the HKICPA offers a simplified framework called HKFRS for Private Entities, which reduces reporting complexity while keeping accounts aligned with international norms. Hong Kong does not use US GAAP, so HKFRS is the relevant standard for local small business accounting.
Why IFRS matters for your business
Preparing accounts under HKFRS, which mirrors IFRS, builds trust with investors and lenders because your statements follow globally recognised rules. Comparability and transparency signal that your bookkeeping meets a high standard, making due diligence faster for anyone reviewing your finances.
Cross-border trade and raising capital become easier when your accounts are accepted in most IFRS jurisdictions with minimal adjustment. If you plan to expand overseas, attract foreign investment or work with multinational partners, HKFRS-based reporting gives you a head start. Consistent standards also help you benchmark performance against competitors using the same accrual basis of accounting.
Keep your Hong Kong reporting on standard with Xero
Meeting HKFRS requirements starts with accurate, up-to-date books. Xero helps small businesses in Hong Kong stay organised with automated bank feeds, real-time reporting and a clear view of cash flow, so the data behind your financial statements is reliable. When it's time to prepare accounts for investors, lenders or regulators, you can get one month free and see how Xero keeps your reporting on standard.
FAQs on IFRS
Below are answers to common questions about IFRS and how the standards apply to businesses in Hong Kong.
Who uses IFRS around the world?
IFRS Accounting Standards are required or permitted in over 160 jurisdictions, including the European Union, Australia, Canada, South Africa and much of Asia. Around 140 of those jurisdictions require IFRS for all or most listed companies and financial institutions.
Does Hong Kong use IFRS?
Hong Kong uses HKFRS, which are converged with IFRS and virtually identical in wording. Listed companies must follow full HKFRS, while smaller businesses can adopt the simplified HKFRS for Private Entities framework.
How many IFRS Accounting Standards are there?
The IASB issues a numbered series of IFRS Accounting Standards, with the most recent being IFRS 18 and IFRS 19, both issued in 2024. These sit alongside the older IAS that remain in force, so there is no single fixed total.
What is the difference between IFRS and US GAAP?
IFRS is principles-based and allows more professional judgement, while US GAAP is rules-based and more prescriptive. The US uses GAAP domestically, but foreign companies listed on US exchanges may file using IFRS.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.