IFRS (International Financial Reporting Standards)

Published Wednesday 30 September 2026

Table of contents

• What is IFRS?
• Why IFRS matters for businesses
• Who sets IFRS
• IFRS in Malaysia: MFRS and MPERS
• Key principles and elements of IFRS
• Common IFRS standards
• IFRS vs GAAP
• How IFRS affects your small business
• Keep standards-ready records with Xero
• FAQs on IFRS
• Related terms
• Learn more about IFRS

Key takeaways

• International Financial Reporting Standards (IFRS) set out how companies prepare and present their financial reports, so accounts can be compared across borders
• Malaysia applies IFRS through the Malaysian Financial Reporting Standards (MFRS), and private entities can use the Malaysian Private Entities Reporting Standard (MPERS) instead
• IFRS tend to be more principles-based than US Generally Accepted Accounting Principles (GAAP), which lean towards detailed rules
• A revised MPERS and a new presentation standard, MFRS 18, will take effect for periods beginning on or after 1 January 2027

What is IFRS?

IFRS are a set of accounting standards that explain how businesses should record and present information in their financial statements. They keep figures consistent and comparable, so a reader in one country can make sense of accounts prepared in another.

More than 140 jurisdictions require IFRS Accounting Standards for all or most publicly listed companies, according to the IFRS Foundation. IFRS cover topics such as revenue, leases, inventory, fixed assets, income taxes and financial instruments. In Malaysia, they’re adopted word for word as MFRS.

Why IFRS matters for businesses

IFRS give everyone who reads your accounts the same rulebook. The IFRS Foundation says global standards make company reports more transparent and easier to compare, which helps investors and lenders judge risk.

Picture a Johor food manufacturer applying for a bank loan to fund a new production line. Because its accounts follow a recognised framework, the bank can compare its profit and debts with other borrowers without reworking the figures. The same shared language helps when you pitch to an investor or sign a supply deal with an overseas buyer.

Who sets IFRS

Two independent boards within the IFRS Foundation write the standards. The International Accounting Standards Board (IASB) develops and approves IFRS Accounting Standards, which govern your financial statements.

The International Sustainability Standards Board (ISSB) develops IFRS Sustainability Disclosure Standards, including IFRS S1 on general sustainability disclosures and IFRS S2 on climate. For most small businesses, the IASB’s accounting standards are the ones that shape everyday bookkeeping.

IFRS in Malaysia: MFRS and MPERS

Malaysia applies IFRS through its own standard-setter, the Malaysian Accounting Standards Board (MASB). MASB’s MFRS match IFRS word for word and have applied since 1 January 2012. They cover entities other than private entities, such as listed companies and financial institutions.

Private entities get a choice. MASB lets private entities apply either MPERS or the full MFRS. MASB defines a private entity as a Companies Act 2016 private company that doesn’t report to the Securities Commission Malaysia or Bank Negara Malaysia.

MPERS is based on the IASB’s IFRS for SMEs (small and medium-sized entities) Accounting Standard. In October 2025, MASB issued MPERS (2025), which aligns with the third edition of IFRS for SMEs. It will apply to annual periods beginning on or after 1 January 2027. Whichever framework you use, the Companies Act 2016 requires your financial statements to comply with approved accounting standards.

Key principles and elements of IFRS

Behind every IFRS standard sits the Conceptual Framework, which describes what makes financial information useful. It names relevance and faithful representation as the two fundamental qualities, supported by comparability, verifiability, timeliness and understandability. In plain terms, your figures should matter to decisions and show what really happened.

The same framework defines five elements of financial statements. Every transaction you record lands in one or more of them.

• Assets, meaning resources your business controls, such as equipment or money customers owe you
• Liabilities, meaning obligations you owe others, such as loans or unpaid supplier bills
• Equity, meaning what remains for owners once liabilities come off assets
• Income, meaning revenue and gains before any costs are deducted
• Expenses, meaning costs such as rent or wages that reduce your profit

Common IFRS standards

There are dozens of individual standards, but a handful shape the accounts of most trading businesses. These are the ones you’re most likely to hear about from your accountant.

• IFRS 15 Revenue from Contracts with Customers, which sets when and how much revenue you record
• IFRS 16 Leases, which brings most leases onto the balance sheet
• International Accounting Standard (IAS) 2 Inventories, which sets how you value stock
• IFRS 9 Financial Instruments, which covers items such as loans and investments
• IFRS 18 Presentation and Disclosure in Financial Statements, which will replace IAS 1 Presentation of Financial Statements

IFRS 18 will apply to annual periods beginning on or after 1 January 2027, with new requirements for presenting and disclosing information. If you hold stock, IAS 2 is the standard to watch, so it pays to get your inventory accounting right from the start.

IFRS vs GAAP

The US uses its own framework. US domestic public companies must use US GAAP, set by the Financial Accounting Standards Board (FASB). The US Securities and Exchange Commission (SEC) lets foreign companies listed in the US use IFRS instead.

KPMG’s comparison handbook sets out the differences topic by topic. These four are a useful starting point.

• IFRS generally rely more on principles and judgement, while US GAAP tends to set more detailed rules
• IFRS rule out the last-in, first-out (LIFO) method for valuing inventory, while US GAAP allows it
• IFRS let you reverse an impairment loss if an asset other than goodwill recovers in value, while US GAAP doesn’t
• IFRS let you capitalise development costs once set criteria are met, while US GAAP generally expenses them straight away

How IFRS affects your small business

For most Malaysian small businesses, IFRS arrive through MFRS or MPERS, and good small business accounting habits make either one easier to follow. These four steps help you stay ready.

1. Check which framework applies

Start by confirming whether your company is a private entity under MASB’s definition. If it is, you can pick MPERS or full MFRS. Your choice shapes how you prepare every set of accounts, so settle it before your next year-end.

2. Keep accrual-based records

Both frameworks expect you to record income when you earn it and expenses when you incur them, regardless of when the cash moves. Keeping your books on an accrual basis all year means your year-end figures are close to ready.

3. Work with a qualified accountant

Standards involve judgement calls, such as how to value stock or when to recognise revenue on a long project. A qualified accountant can make those calls consistently and prepare statements that meet the Companies Act 2016. To find one near you, browse the Xero Advisor Directory of certified professionals.

4. Plan for the 2027 changes

MFRS 18 will replace MFRS 101 for annual periods beginning on or after 1 January 2027. If you use MPERS, the revised MPERS (2025) will take effect on the same timeline. Ask your accountant early which changes will affect your first 2027 reporting period.

Keep standards-ready records with Xero

Accurate records, kept all year, are the foundation of financial statements that meet MFRS or MPERS. Xero keeps your books current with automated bank feeds and easy-to-read reports. You can also work with your accountant in real time, so you’re both using the same numbers at year-end. Try Xero today and get one month free.

FAQs on IFRS

Here are quick answers to common questions about IFRS in Malaysia.

Is MFRS the same as IFRS?

In substance, yes: MASB adopts IFRS word for word under Malaysian names. For example, MFRS 18 matches IFRS 18 and will replace MFRS 101, the Malaysian version of IAS 1.

Does my small business need to follow IFRS?

It depends on your company type: private entities can use MPERS, while public companies need full MFRS. If you’re planning to go public, ask your accountant whether starting on MFRS now makes sense.

What is IFRS for SMEs?

It’s a simpler IASB standard for entities without public accountability, and its third edition, issued in February 2025, will take effect on 1 January 2027. Entities can adopt it early or keep using the 2015 edition until then.

Does an audit-exempt company still need to follow accounting standards?

Yes. An audit exemption from the Companies Commission of Malaysia (SSM) covers only the audit. You’ll still prepare financial statements under approved accounting standards and lodge them with SSM.

Is IFRS 18 in force yet?

It will be from 1 January 2027, and companies can choose to apply it earlier. For a company with a December year-end, the first full year under IFRS 18 will end on 31 December 2027.

Related terms

• Financial reporting
• Accrual accounting
• Balance sheet
• Assets
• Liabilities
• Equity
• Profit and loss statement
• Audit

Learn more about IFRS

• Trial balance
• Recording accounting transactions
• Double-entry bookkeeping

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