IFRS in the UK

For guidance on the UK's withdrawal from the European Union see our dedicated page.

Prior to the UK’s exit from the EU, for each financial year beginning on or after 1 January 2005, companies with securities admitted to trading on a regulated market in any EU Member State at the end of the reporting period were required to prepare their consolidated financial statements in accordance with 'international accounting standards'.

In this context, ‘in­ter­na­tional ac­count­ing stand­ards’ meant stand­ards (In­ter­na­tional Ac­count­ing Stand­ards and In­ter­na­tional Fin­an­cial Re­port­ing Stand­ards) issued by the International Accounting Standards Board (IASB) and interpretations issued by the IFRS Interpretations Committee (and its predecessor, the Standing Interpretations Committee) that had been endorsed by the EU. 

From IP completion day, the International Accounting Standards and European Public Limited-Liability Company (Amendment etc.) (EU Exit) Regulations 2019 (SI 2019/685) amended the Companies Act 2006 to repeal the IAS Regulation so that it no longer applies to the UK. Instead, the regulations introduced a new legal term - ‘'UK-adopted international accounting standards'’ - for IFRS Accounting Standards as adopted by the UK.

From IP completion day, UK com­pan­ies re­quired to apply IFRS Accounting Stand­ards in their con­sol­id­ated fin­an­cial state­ments (i.e. com­pan­ies with their se­cur­it­ies ad­mit­ted to trading on a UK reg­u­lated market - see below) are required to state compliance with UK-adopted IFRS Accounting Standards, rather than EU-adopted IFRS Accounting Standards. UK-in­cor­por­ated com­pan­ies with se­cur­it­ies ad­mit­ted to trading else­where in the EU may need to confirm they have fol­lowed both frame­works, unless the EU de­term­ines that UK-ad­op­ted IFRS Accounting Stand­ards are equi­val­ent to EU-ad­op­ted IFRS Accounting Stand­ards, something which has not been con­firmed at the time of writing.

UK com­pan­ies subject to Chapter 4 of the Dis­clos­ure Guid­ance and Trans­par­ency Rules (DTR) are also re­quired to state com­pli­ance with EU-ad­op­ted IFRS Accounting Stand­ards for periods com­men­cing before 1 January 2021.

En­tit­ies trans­ition­ing from EU-ad­op­ted IFRS Accounting Stand­ards to UK-ad­op­ted IFRS Accounting Stand­ards for the first time for periods com­men­cing on or after IP com­ple­tion day should not apply IFRS 1 First-time Adoption of International Financial Standards.

UK endorsement

Legislation provided for a UK mechanism for the endorsement of IFRS Accounting Standards from IP completion day. IFRS Accounting Standards as adopted by the UK on IP completion day are the extant IFRS Accounting Standards as adopted by the EU immediately before IP completion day, but may diverge over time; the timing of UK endorsement of standards may also be different from EU endorsement. The Secretary of State for the Department for Business and Trade (DBT) has delegated to the UK Endorsement Board (UKEB) by statute the power to endorse IFRS Accounting Standards for use in the UK.

The UK endorsement website is available here.  The UKEB is accountable to the Secretary of State on technical matters and the FRC Board on its governance and due process procedures.

Companies with securities admitted to trading on a UK regulated market

As noted above, after IP completion day, UK companies with their securities admitted to trading on a UK regulated market need to comply with UK-adopted IFRS Accounting Standards, rather than EU-adopted IFRS Accounting Standards.

The Financial Conduct Authority (FCA) maintains the list of UK regulated markets. Currently, this list comprises:

  • London Stock Exchange;
  • Cboe Europe Equities Regulated Market;
  • The London Metal Exchange;
  • ICE Futures Europe;
  • AQSE Main Market; and
  • International Property Securities Exchange (IPSX).

The Alternative Investment Market (AIM) is not within the definition of a UK regulated market. However, the AIM rules as updated in 2020 require any AIM company incorporated in the UK or an EEA country (being any EU member state, Norway, Iceland, Liechtenstein or (for the purposes of the AIM rules) the Channel Islands and Isle of Man) to prepare accounts in accordance with IFRS Accounting Standards. For companies incorporated in the UK for periods commencing on or after IP completion day, this should be read as UK-adopted IFRS Accounting Standards; those incorporated in the EEA should apply EU-adopted IFRS Accounting Standards.  

Use of IFRS Accounting Standards by other companies

Except where IFRS Accounting Standards are required to be used, UK companies, other than charities, may choose to prepare their individual and/or group financial statements in accordance with either UK GAAP or IFRS Accounting Standards, subject to the constraints. Companies that are charities must prepare their individual and group financial statements in accordance with UK GAAP.

Thus, UK companies other than charities can apply:

  • IFRS Accounting Standards (consolidated and separate financial statements); or
  • UK GAAP - FRS 101 (IFRS Accounting Standards with reduced disclosure) (separate financial statements) if certain qualifying conditions are met; or
  • UK GAAP - FRS 102 (consolidated and separate).

Where companies prepare both individual and group financial statements, the choice between IFRS Accounting Standards and UK GAAP operates separately for each.  A company that is required by Companies Act to use IFRS Accounting Standards for its consolidated financial statements still has a free choice of using IFRS Accounting Standards or UK GAAP for its individual (i.e. separate) financial statements.  Similarly, a company that has chosen, but which is not required, to use IFRS Accounting Standards for its consolidated financial statements does not have to use IFRS Accounting Standards for its individual financial statements.  Although less likely, it is also possible by law for a parent company to prepare its individual financial statements under IFRS Accounting Standards while preparing UK GAAP consolidated financial statements.

As noted above, the free choice is subject to certain constraints. Where group accounts are prepared, the Companies Act requires that the individual accounts of the parent company and its subsidiary companies must be prepared using the same framework and not a mixture of the two.  However there are certain exemptions.

There are also specific rules which make it difficult to switch back to Companies Act accounts once a company has started to prepare individual/group accounts under IFRS Accounting Standards. Subject to the above constraints there is freedom to move from Companies Act to IFRS separate/group accounts.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.