IFRS (International Financial Reporting Standards) is a set of globally recognised accounting standards developed by the International Accounting Standards Board (IASB). In the UK, IFRS is mandatory for companies listed on the London Stock Exchange and optional for other companies. IFRS aims to provide a common global financial reporting language.
In Depth
IFRS provides a standardised framework for financial reporting that enables comparison across companies and countries. Over 140 countries require or permit IFRS for listed companies, making it the dominant global accounting framework.
In the UK, the regulatory landscape is: listed companies must use UK-adopted IFRS for consolidated accounts, AIM-listed companies may choose between IFRS and FRS 102, private companies typically use FRS 102 (UK GAAP), and very small companies may use FRS 105.
Key IFRS standards that impact FP&A include: IFRS 15 (Revenue Recognition — five-step model for recognising revenue), IFRS 16 (Leases — bringing operating leases onto the balance sheet), IFRS 9 (Financial Instruments — expected credit loss model for receivables), IAS 36 (Impairment — testing assets for value decline), and IAS 38 (Intangible Assets — criteria for capitalisation).
FP&A teams need to understand IFRS because it determines how actuals are reported, which affects variance analysis and forecasting. For example, IFRS 16 brings lease liabilities onto the balance sheet, increasing reported debt and changing EBITDA calculations.
For UK companies transitioning from FRS 102 to IFRS (for example, upon listing), the FP&A team must understand the differences and their impact on KPIs, budgets, and management reports.
Real-World Example
A UK company preparing for an IPO on the London Stock Exchange transitions from FRS 102 to IFRS. Key impacts identified by the FP&A team: IFRS 16 adds £4.2M of lease liabilities to the balance sheet (increasing debt-to-equity), IFRS 15 changes revenue recognition for multi-year contracts (reducing year-one recognised revenue by £800K), and IAS 38 requires reassessment of capitalised development costs. The FP&A team restates three years of comparatives and rebuilds the budget model to reflect IFRS accounting policies.
Related Terms
Revenue is the total income generated from the sale of goods or services before any expenses are ded...
Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful econ...
Financial consolidation is the process of combining the financial results of multiple entities withi...
UK GAAP (Generally Accepted Accounting Practice) is the set of accounting standards and practices ap...
FRS 102 (Financial Reporting Standard 102) is the principal accounting standard for UK entities not ...
Stop wrestling with spreadsheets. Grove FP gives your finance team a purpose-built platform for budgeting, forecasting, and financial modelling — designed for UK businesses.
FAQ