IFRS (International Financial Reporting Standards)
IFRS is a global accounting language for financial statements. Learn how it works and how it applies in Indonesia.
Published Wednesday 30 September 2026
Table of contents
Key takeaways
- International Financial Reporting Standards (IFRS) are global accounting standards that give businesses a common financial language
- IFRS is principles-based and required in more than 140 jurisdictions, while the US uses its more rules-based generally accepted accounting principles (US GAAP)
- Indonesia sets four tiers of local standards linked to the global framework, and most private small businesses use one of the simpler tiers
- A new presentation standard and a new edition of the standard for small and medium-sized entities both apply from 1 January 2027
What is IFRS?
International Financial Reporting Standards (IFRS) are a set of accounting standards for preparing financial statements. They give businesses a common accounting language, so people in different jurisdictions can read and compare the numbers.
Picture an investor in Jakarta weighing up two listed companies based in different jurisdictions. If both use the same standards, the investor can read their revenue, profit and debt on the same basis.
The standards set out how to recognise, measure, present and disclose items such as revenue, leases, fixed assets and income taxes. They focus on reporting, so rules on keeping records, such as how long you store documents, come from local law.
The International Accounting Standards Board (IASB) develops and maintains the standards, now officially called IFRS Accounting Standards. The IASB is an independent board overseen by the IFRS Foundation, a not-for-profit organisation.
The set also includes older International Accounting Standards (IAS), such as IAS 2 on inventories, which the IASB adopted and still maintains. The IASB also publishes the IFRS for SMEs Accounting Standard, a simpler version for small and medium-sized entities (SMEs).
Why IFRS matters for businesses
Common standards make financial statements consistent and comparable, which builds trust with the people who rely on them. Investors, lenders and buyers can judge a business’s performance without first decoding its accounting choices.
That trust has practical value. A company using these standards can raise money from investors in other jurisdictions more easily, because those investors already know how to read the statements.
Shared standards also give auditors a clear benchmark. During an external audit, the auditor checks whether your statements follow the framework that applies to you. For Indonesian businesses, that framework is usually a local standard shaped by the global rules, so knowing the basics helps you read your own reports.
Who uses IFRS
Adoption is widespread. According to the IFRS Foundation, more than 140 jurisdictions require the use of its accounting standards.
A jurisdiction can be a country or a territory with its own reporting rules, such as Hong Kong. These requirements usually target publicly accountable companies, such as listed companies and banks, so many private businesses follow simpler local standards.
The US is the best-known exception. US companies report under US GAAP, a separate framework with its own standard-setter.
How IFRS applies in Indonesia
Indonesia uses its own Standar Akuntansi Keuangan (SAK), or financial accounting standards, which closely follow the global standards. They’re set by DSAK IAI, the Indonesian Financial Accounting Standards Board of Ikatan Akuntan Indonesia (IAI), the Institute of Indonesia Chartered Accountants.
The IFRS Foundation’s Indonesia jurisdiction profile describes four SAK tiers. The right one for you depends on your business’s size and public accountability.
- SAK Internasional adopts the global standards in full. Only Indonesian-registered companies trading equity on regulated markets in more than one country may choose it.
- SAK Indonesia, substantially converged with IFRS, covers listed entities and others with significant public accountability. Its effective dates generally run a year behind.
- SAK Entitas Privat (SAK EP) applies to private entities from 1 January 2025. The IAI bases it on the 2015 IFRS for SMEs standard.
- SAK Entitas Mikro, Kecil dan Menengah (SAK EMKM) is for micro, small and medium entities. It measures most items at historical cost, meaning what you paid.
SAK EP replaced SAK Entitas Tanpa Akuntabilitas Publik (SAK ETAP), the earlier standard for entities without public accountability. If your past reports refer to SAK ETAP, your accountant can help you move to SAK EP.
Main financial statements under IFRS
The standards define what a complete set of financial statements contains. Each statement answers a different question about the business, and together they give a full picture.
A complete set includes:
- a statement of financial position, showing your assets and liabilities on a given date
- a statement of profit or loss and other comprehensive income, showing your profit for the period plus other gains and losses
- a statement of changes in equity, showing how the owners’ stake moved during the period
- a statement of cash flows, tracking how money moved in and out of the business
- notes, explaining your accounting policies and the detail behind the numbers
IFRS vs GAAP
The biggest difference is the approach. IFRS is principles-based, setting a clear goal and expecting you to apply judgement. US GAAP is rules-based, with detailed guidance for specific situations.
Think of a dress code. A principles-based code says “dress for a client meeting”, while a rules-based code lists the approved outfits. That difference in approach leads to some practical gaps:
- IAS 2 prohibits the last in, first out (LIFO) inventory method, while US GAAP allows it
- IAS 16 lets you revalue property, plant and equipment to fair value, where US GAAP keeps these assets at cost
- IAS 36 allows you to reverse some impairment losses if an asset’s value recovers, although goodwill impairments stay in place
- IAS 38 requires you to capitalise development costs as an intangible asset once set criteria are met
IFRS for small businesses
The full standards are written with large, publicly accountable companies in mind, so the IASB offers a lighter version for smaller entities with fewer disclosures.
The IASB issued the third edition of the IFRS for SMEs Accounting Standard in February 2025. It applies to annual periods beginning on or after 1 January 2027, and you can adopt it early.
In Indonesia, SAK EP is based on the 2015 edition, and DSAK IAI decides how and when to reflect later editions. Micro and small businesses can often use SAK EMKM instead. An experienced accountant or bookkeeper near you can confirm which standard suits your business.
What’s changing in IFRS
The biggest upcoming change affects how companies present their results. The IASB has issued IFRS 18 Presentation and Disclosure in Financial Statements to replace IAS 1. It applies to annual periods beginning on or after 1 January 2027.
The new standard adds required subtotals to the statement of profit or loss, including operating profit. It also asks companies to explain any performance measures they define themselves, so readers can compare results more easily.
In Indonesia, DSAK IAI decides when changes like this flow into SAK Indonesia. Your accountant can tell you when your reporting needs to change.
Keep your financial reports ready with Xero
Whichever standard applies to you, accurate day-to-day records make year-end reporting faster. Xero brings your accounting data into one place, with automated bank feeds keeping it up to date.
You can run easy-to-read reports whenever you need them and share your data with your accountant in real time. Pick a plan that suits your business and get one month free.
FAQs on IFRS
Here are quick answers to common questions from small business owners in Indonesia.
Does Indonesia use IFRS?
It does, through convergence, with DSAK IAI adapting each standard into SAK Indonesia. Statements prepared this way look familiar to international investors, though timing and some details can differ.
What’s the difference between IAS and IFRS?
The International Accounting Standards Committee (IASC) issued IAS between 1973 and 2001. The IASB then took over, adopted the existing IAS and now issues new standards as IFRS, so both form part of today’s set.
Do small businesses in Indonesia have to follow IFRS?
Most private small businesses use SAK EP or SAK EMKM, which are simpler than the full global standards. Banks and investors may ask which standard you use, so confirm it with your accountant before you prepare annual statements.
What are the key IFRS standards to know?
IFRS 15 Revenue from Contracts with Customers sets a five-step model for when and how much revenue you recognise. IFRS 16 Leases brings most leases onto the statement of financial position as a right-of-use asset and a lease liability.
Does IFRS tell you how to keep your books?
The standards cover what goes into financial statements and how it’s presented. Your bookkeeping method and how long you keep records come from local law and your accountant’s advice.
Related terms
Learn more about IFRS
Handy resources
Advisor directory
You can search for experts in our advisor directory
Xero Small Business Guides
Discover resources to help you do better business
Try Xero for free
Try Xero’s fast, simple, powerful online accounting software for your small business
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.