Preface to IFRS Standards
Active
Preface to International Financial Reporting Standards
Explains the objectives and due process of the IFRS Foundation and IASB, and the scope and authority of IFRS Standards.
1
Purpose of the Preface
An orientation document, not a technical standard
The Preface explains the OBJECTIVES and DUE PROCESS of the IFRS Foundation and the International Accounting Standards Board (IASB), and explains the SCOPE, AUTHORITY, and APPLICABILITY of the documents that form part of "IFRS Standards" – it contains no technical accounting requirements itself, but frames how every other pronouncement in the library should be read and understood.
2
IFRS Foundation Structure
A three-tier governance structure
The IFRS Foundation is an independent, not-for-profit organisation. Its MONITORING BOARD provides a formal link between the Trustees and public authorities (such as securities regulators). The TRUSTEES are responsible for governance and oversight, including appointing IASB members and securing funding, but have NO involvement in technical, standard-setting matters.
Supporting bodies
The Foundation also oversees the IFRS INTERPRETATIONS COMMITTEE (technical interpretations), the IFRS ADVISORY COUNCIL (strategic advice from a broad range of stakeholders), and – since 2021 – the INTERNATIONAL SUSTAINABILITY STANDARDS BOARD (ISSB), which develops IFRS Sustainability Disclosure Standards alongside the IASB's financial reporting Standards.
3
The IASB – Role & Composition
The standard-setting body itself
The IASB is the INDEPENDENT standard-setting body of the IFRS Foundation, responsible for developing and issuing IFRS Standards, including the IFRS for SMEs Standard, and for approving Interpretations developed by the IFRS Interpretations Committee. Members are appointed by the Trustees based on professional competence and practical experience, with the Trustees also required to ensure an appropriate balance of professional backgrounds and geographical diversity among IASB members.
4
Objectives of the Foundation and IASB
What the Foundation exists to achieve
Develop, in the public interest, a single set of high-quality, understandable, enforceable, and globally accepted IFRS Standards based on clearly articulated principles Promote the use and rigorous application of those Standards Take account of the financial reporting needs of emerging economies and small and medium-sized entities Promote and facilitate adoption of IFRS Standards through the convergence of national accounting standards with IFRS Standards
5
Scope & Authority of IFRS Standards
What "IFRS Standards" comprises
IFRS Standards are developed with the objective of applying to the GENERAL PURPOSE financial statements of profit-oriented entities – including commercial, industrial, and financial entities, whether organised in corporate or other forms. The term "IFRS Standards" comprises: IFRS Standards issued by the IASB; IAS Standards issued by the predecessor IASC and still in force; and Interpretations (IFRIC and SIC), which are an integral part of the requirements.
Not designed for not-for-profit or public sector entities
IFRS Standards are not specifically designed for not-for-profit, government, or public sector entities – though there is no reason preventing such entities applying them, if considered appropriate. Public sector entities more commonly refer to International Public Sector Accounting Standards (IPSAS), which are separately developed.
6
Due Process
A transparent, consultative process
StageWhat happens
1Agenda consultation and research, drawing on staff research and input from the Advisory Council and other stakeholders
2Discussion Paper published for public comment (not always required)
3Exposure Draft published for public comment – a mandatory step before any new or amended Standard
4Redeliberation of comments received, and issuance of the final Standard, requiring the support of at least nine of the fourteen IASB members
7
Interpretations – the IFRS Interpretations Committee
Resolving diversity in practice
The IFRS Interpretations Committee identifies and addresses questions of application arising in practice where diversity has emerged or seems likely to emerge, or where clarifying guidance is needed on an issue not specifically addressed by existing Standards. Its Interpretations (formerly SIC, now IFRIC) require IASB approval and, once issued, have the SAME AUTHORITY as the Standards themselves.
8
Who Is Expected to Apply IFRS Standards
Applicability, not universal mandate
The IASB itself has no authority to REQUIRE compliance with its Standards – application is determined by individual jurisdictions' legal and regulatory requirements, or by voluntary adoption. IFRS Standards are designed to apply to general purpose financial statements and other financial reporting of all profit-oriented entities; jurisdictions differ in whether they mandate IFRS for listed entities, permit optional adoption, or use IFRS as the basis for local GAAP.
9
Effective Date & Transition
Standards specify their own transition
Each Standard specifies its own EFFECTIVE DATE and any transitional provisions, including whether earlier application is permitted. Entities generally apply new or amended Standards RETROSPECTIVELY unless the Standard specifies otherwise (per IAS 8's general transition principles) – many major Standards include specific transition reliefs to ease first-time application of significant changes.
10
Language & Translation
English as the authoritative text
IFRS Standards are issued in ENGLISH, which is the authoritative text. The IFRS Foundation coordinates TRANSLATION of Standards into other languages through an established translation process, but in the event of any inconsistency between a translation and the English text, the English version prevails.
11
Relationship with Other Pronouncements
Where the Preface sits relative to the rest of the library
PronouncementRelationship to the Preface
Conceptual FrameworkAlso not a Standard; describes concepts underlying Standards, whereas the Preface describes the STRUCTURE and PROCESS by which Standards are created
IFRS Practice StatementsNon-mandatory guidance documents; entities are not required to comply, unlike Standards and Interpretations
IFRS for SMEs StandardA separate, self-contained Standard developed by the IASB specifically for entities without public accountability
12
History – IASC to IASB
A 2001 restructuring
The IASB's predecessor, the International Accounting Standards Committee (IASC), issued International Accounting Standards (IAS) from 1973 onward. In 2001, the IASC was restructured into the IFRS Foundation and the IASB, which adopted the body of existing IAS Standards and began issuing new Standards under the "IFRS" designation going forward – explaining why the library today contains both "IAS" (older, IASC-era) and "IFRS" (newer, IASB-era) numbered Standards side by side.
13
IASB vs FASB Standard-Setting Structure
Comparison – IASB/IFRS Foundation vs FASB/FAF
FeatureIASB / IFRS FoundationFASB / Financial Accounting Foundation (FAF)
Geographic scopeGlobal – Standards intended for worldwide adoption across many jurisdictionsNational – standards apply specifically to US GAAP reporting
Governance layerMonitoring Board + Trustees + IASBSEC oversight + FAF Board of Trustees + FASB
Legal authority to mandate useNone directly – adoption depends on individual jurisdictionsSimilarly, FASB itself has no direct enforcement power, though SEC recognition gives US GAAP de facto mandatory status
Despite differing geographic scope, both bodies follow broadly similar independent, due-process-driven standard-setting models, and the two boards have periodically pursued formal convergence projects (e.g. on revenue recognition and leases).
14
Glossary
Due process
The IASB's transparent, consultative procedure for developing and amending Standards, involving public comment periods at multiple stages.
Exposure Draft
A formal, mandatory public consultation document the IASB publishes before finalising any new or significantly amended Standard.
General purpose financial statements
Financial statements intended to meet the common information needs of a wide range of external users.
Financial statement key
BS Balance sheet
IS Income statement
SE Statement of changes in equity
OCI Other comprehensive income
SCF Statement of cash flows