IFRS (International Financial Reporting Standards)
A plain-English guide to IFRS and how the Philippines applies it as PFRS.
Published Monday 31 August 2026
Table of contents
Key takeaways
- IFRS (International Financial Reporting Standards) are global accounting rules that keep financial statements consistent and comparable across countries
- In the Philippines, IFRS is applied locally as Philippine Financial Reporting Standards (PFRS), and the set you follow depends on your company's size
- More than 140 jurisdictions require IFRS for listed companies, though the United States and China use their own accounting systems
- Following the right reporting standard helps you build credibility with lenders and investors, and makes cross-border trade easier
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. They exist so financial statements are consistent and comparable across countries, and credible to anyone who reads them.
Think of IFRS as a common accounting language. When businesses in different countries prepare their numbers the same way, a lender, investor, or regulator in one market can read the accounts of a company in another market and know exactly what they are looking at. If you want a refresher on the reports themselves, our guide to how financial statements are prepared is a good place to start.
Who creates and maintains IFRS?
IFRS is developed and maintained by the International Accounting Standards Board (IASB). The IASB is an independent standard-setting body within the IFRS Foundation, a not-for-profit organisation based in London.
The IASB was created in 2001, taking over from the earlier International Accounting Standards Committee (IASC). Older standards issued by the IASC are called IAS (International Accounting Standards), and many remain in force today.
IFRS in the Philippines
In the Philippines, IFRS is applied locally as Philippine Financial Reporting Standards (PFRS). The standards are set by the Financial and Sustainability Reporting Standards Council (FSRSC), formerly the Financial Reporting Standards Council (FRSC), which operates under the Board of Accountancy (BOA) and the Professional Regulation Commission (PRC). The Securities and Exchange Commission (SEC) then adopts them for use.
The framework is tiered, and the set you follow depends on your total assets and total liabilities:
- Full PFRS applies to publicly listed companies, or businesses with total assets above PHP 350 million or total liabilities above PHP 250 million
- PFRS for SMEs (small and medium-sized entities) applies to businesses with total assets of PHP 100 to 350 million or total liabilities of PHP 100 to 250 million
- PFRS for Small Entities applies to businesses with total assets or total liabilities of PHP 3 to 100 million
- Micro entities can use simpler reporting when their total assets and total liabilities are both below PHP 3 million
Your total assets and liabilities are the starting point for working out which tier fits. Keeping accurate records through the year makes this far easier to sort out, and our guide to bookkeeping basics for small businesses covers where to begin.
Which countries use IFRS?
IFRS is now required in more than 140 jurisdictions for most or all listed companies. That includes the European Union (EU), Canada, and much of Asia, including the Philippines.
The United States is the main exception. Domestic companies there use US GAAP (Generally Accepted Accounting Principles), and China applies its own national accounting standards.
What financial statements does IFRS require?
Under IAS 1, a complete set of financial statements includes five parts:
- a statement of financial position, also called the balance sheet
- a statement of profit or loss and other comprehensive income
- a statement of changes in equity
- a statement of cash flows
- notes to the financial statements
Each report answers a different question about your business, from what you own and owe to where your cash went. For a closer look at how these documents come together each period, read our overview of monthly financial reports.
IFRS vs GAAP: what is the difference?
IFRS is widely described as principles-based, which gives preparers more room for professional judgement. US GAAP is considered more rules-based, with detailed guidance written for specific situations, so an accountant can help you apply the right treatment.
Inventory is a clear example. IAS 2 prohibits the LIFO (last-in, first-out) inventory method, while US GAAP permits it.
The United States requires its domestic public companies to use US GAAP, though the SEC does let foreign companies file using IFRS. So the two systems still meet in practice.
Why IFRS matters for your business
Even a small business in the Philippines gains from reporting that follows a recognised standard. When your financial statements are prepared under PFRS, lenders and investors can compare your business against others and read your numbers with confidence.
That credibility counts when you apply for a loan, bring in a partner, or invite outside funding. And if you plan to trade across borders or expand into other markets, reporting on a shared standard makes your accounts straightforward for overseas parties to understand. Our guide to small business accounting shows how solid records support these goals.
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FAQs on IFRS
Here are quick answers to some common questions about IFRS and how it applies in the Philippines.
What does IFRS stand for?
IFRS stands for International Financial Reporting Standards. It is the global framework companies use to prepare and present their financial statements.
Does the Philippines use IFRS?
Yes. The Philippines adopts IFRS as Philippine Financial Reporting Standards (PFRS), which keeps local reporting aligned with the international standard.
What is the difference between IFRS and PFRS?
PFRS is the Philippine version of IFRS, adopted and adapted for local use by Philippine regulators. The two are closely aligned, so a business that follows PFRS is effectively following IFRS.
Is IFRS mandatory for small businesses in the Philippines?
Full PFRS is not required for most small businesses. Smaller companies apply lighter versions, such as PFRS for Small Entities or micro-entity reporting, based on their assets and liabilities.
What is the difference between IFRS and IAS?
IAS are the earlier standards issued before 2001 by the IASC, while IFRS are issued by the IASB from 2001 onwards. Both still apply, and many original IAS remain in force alongside newer IFRS.
Related terms
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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.