The International Financial Reporting Standards, or IFRS, are used by public companies in the EU and other parts of the world as the preferred method of reporting financial data. Before exiting from the EU, UK companies trading in UK-regulated markets used EU-adopted IFRS. The full IFRS contains a set of 17 principles. For example, IFRS 1 explains the procedure for first-time companies wishing to adopt IFRS. It highlights the requirements for preparing financial statements.
However, as of January 1, 2021, publicly listed companies in the UK are required to follow the UK-adopted IFRS. Except for a few disclosure exemptions, UK and EU-adopted IFRS are the same. In the UK, the subsidiaries of public listed companies can use UK GAAP standards to prepare individual financial statements, but there are some limitations. In some instances, the company may be required to use the same reporting method for its consolidated and individual financial statements.
Also worth noting is that in the future there may be more differences between UK-adopted and EU-adopted IFRS as the UK makes more changes to its financial sector.
UK SMEs are not required to use IFRS for SMEs. Furthermore, local legislative authorities choose the criteria under which SMEs can use IFRS. In addition, most SMEs use the new UK GAAP to prepare their financial statements. A UK SME may use IFRS for SMEs to attract international investors.