IFRS

IFRS stands for International Financial Reporting Standards, the accounting rules most public companies outside the United States are required to follow, including in the European Union, the United Kingdom, and much of Asia. It plays the same role GAAP plays in the US: a common set of rules that makes financial statements comparable across companies, but it is a separate standard, set by a different body (the International Accounting Standards Board rather than the US-based FASB).

The two frameworks are similar in most respects and have converged over time, but real differences remain. IFRS generally does not allow LIFO inventory valuation, follows different rules for capitalizing development costs, and takes a more principles-based approach overall, leaving more room for company judgment, compared to GAAP's more rules-based, prescriptive style.

For an investor, the practical takeaway is that a company reporting under IFRS and one reporting under GAAP are not always directly comparable line by line, even when both statements look similar on the surface. Knowing which standard a company follows is one of the first things worth checking before comparing its numbers to a peer that reports under the other.