IFRS

Published Wednesday 12 August 2026

Table of contents

• What is IFRS?
• How IFRS works
• IFRS vs GAAP
• IFRS in South Africa
• Benefits of IFRS
• Main IFRS standards
• Simplify IFRS-ready reporting with Xero
• FAQs on IFRS
• Related terms
• Learn more about IFRS

Key takeaways

• IFRS (International Financial Reporting Standards) are globally recognised accounting rules that ensure financial reports are consistent, comparable and credible across borders.
• In South Africa, JSE-listed and public interest companies must use full IFRS, while other companies may use IFRS or the IFRS for SMEs Standard based on their public interest score.
• IFRS differs from US GAAP: IFRS is principles-based and allows interpretation, while US GAAP is rules-based and more prescriptive.
• More than 140 jurisdictions worldwide require IFRS, making it the dominant global accounting framework.

What is IFRS?

IFRS, or International Financial Reporting Standards, are a set of accounting rules for how information is gathered and presented in financial reports. These standards are issued and maintained by the International Accounting Standards Board (IASB), which sits within the London-based, not-for-profit IFRS Foundation.

The goal of IFRS is to provide a common global accounting language. When companies follow the same standards, their financial reports become consistent, comparable and credible, whether they operate in Johannesburg, London or Tokyo.

How IFRS works

IFRS provides a framework of rules that cover key areas of accounting, including revenue recognition, income taxes, fixed assets and leases. Under IFRS, companies must prepare a complete set of financial statements: a statement of financial position, a statement of profit or loss, a statement of changes in equity, a statement of cash flows and accompanying notes.

IFRS uses accrual accounting, which means transactions are recorded when they occur, not when cash changes hands. Keeping accurate records of every transaction gives a more accurate picture of a company's financial health over a reporting period.

IFRS vs GAAP

The United States uses its own set of standards called US GAAP (Generally Accepted Accounting Principles) rather than IFRS. The main difference lies in approach: IFRS is principles-based and allows more room for professional judgement, while US GAAP is rules-based and more prescriptive.

A concrete example is inventory valuation. Under IAS 2, IFRS permits only the FIFO (first-in, first-out) or weighted average cost methods. LIFO (last-in, first-out) is not allowed under IFRS, whereas US GAAP permits all three methods.

IFRS in South Africa

South Africa has adopted IFRS as a core part of its financial reporting framework. Companies listed on the Johannesburg Stock Exchange (JSE) and other public interest entities must use full IFRS for their financial statements.

Other companies may use full IFRS or the IFRS for SMEs Standard, depending on their public interest score under the Companies Act 71 of 2008 and the 2011 Companies Regulations. The public interest score is calculated based on the number of employees, annual turnover, third-party liabilities and the number of shareholders. The IFRS Foundation's South Africa jurisdiction profile provides detailed guidance on these requirements.

For smaller businesses, the IFRS for SMEs Standard offers a simplified set of accounting rules while maintaining alignment with the broader IFRS framework. Understanding your small business accounting obligations helps you choose the right reporting approach.

Benefits of IFRS

Adopting IFRS can bring several advantages for businesses, particularly those looking to grow or attract investment.

• Transparency: IFRS requires detailed disclosures, giving stakeholders a clear view of financial performance.
• Comparability: investors, lenders and partners can compare your financial statements with those of companies in other countries.
• Credibility: following internationally recognised standards builds trust with banks, investors and regulators.
• Access to global markets: IFRS compliance can make it easier to raise capital or expand operations across borders.

Main IFRS standards

The IFRS framework includes dozens of individual standards, each covering a specific area of accounting. Here are some of the most commonly referenced standards.

• IFRS 15: revenue from contracts with customers
• IFRS 16: leases
• IAS 1: presentation of financial statements
• IAS 2: inventories
• IAS 7: statement of cash flows

According to the IFRS Foundation, more than 140 jurisdictions now require IFRS for at least some domestic companies, making it the dominant global accounting framework.

Simplify IFRS-ready reporting with Xero

Accurate, up-to-date records form the foundation of IFRS-compliant reporting. Xero helps small businesses keep their finances organised with automated bank feeds, easy invoicing and real-time financial reports. When your books are in order, preparing financial statements that meet reporting requirements becomes straightforward.

Ready to see how Xero can support your business? You can get one month free to explore the platform and streamline your accounting.

FAQs on IFRS

Here are answers to common questions about International Financial Reporting Standards.

Who sets IFRS standards?

The International Accounting Standards Board (IASB) develops and issues IFRS. The IASB operates under the IFRS Foundation, an independent, not-for-profit organisation based in London.

How many countries use IFRS?

More than 140 jurisdictions require IFRS for at least some domestic listed or public interest companies. This includes major economies across Europe, Africa, Asia and South America.

Does South Africa use IFRS?

Yes. JSE-listed companies and public interest entities must use full IFRS. Other South African companies may use full IFRS or the IFRS for SMEs Standard, depending on their public interest score.

What is IFRS for SMEs?

IFRS for SMEs is a simplified version of full IFRS, designed for small and medium-sized entities that do not have public accountability. It reduces complexity while keeping the core principles of IFRS intact.

What is the difference between IFRS and GAAP?

IFRS is principles-based and used in over 140 jurisdictions globally, while US GAAP is rules-based and used primarily in the United States. IFRS allows more professional judgement, whereas US GAAP provides detailed, prescriptive rules.

Related terms

• Financial reporting
• Financial management
• Assets
• Accrual accounting

Learn more about IFRS

• Small business bookkeeping
• Accounting and bookkeeping guides
• How to do bookkeeping