Differences between IFRS and UK GAAP. Essential summary

Oct 30, 2022by Eduyush Team

International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (UK GAAP) are both standards for reporting financial information. IFRS is the standard set of accounting principles and reporting practices used to prepare and present financial statements in markets like the European Union, Japan, Australia and New Zealand. 

In theory, IFRS and UK GAAP are very similar; however, in practice, there are some significant differences between the two accounting principles. The scope of these standards is not identical, meaning there are some essential differences between IFRS and UK GAAP. Let's take a closer look at where they differ.

Summary of Differences between IFRS and UK GAAP

Conceptual Framework


  • Qualitative characteristics split into fundamental and enhancing
  • Two main measurement bases are permitted: historical cost and current value.
  • The current value can be one of the following: 
    • Fair value
    • Value in use (or fulfilment value for liabilities)
    • Current cost


  • Only one tier of qualitative characteristics
  • Only two measurement bases (cost and fair value)

 Primary financial statements

The primary difference is related to the terminology of financial statements between these standards


Terminology: Statement of Financial Position, Statement of Profit or Loss & Retained Earnings. Other comprehensive income


Balance Sheet/Statement of financial position, Profit and loss account/Income statement & Profit and loss account (reserve)


Measurement: Under UK GAAP, Inventories held for distribution at no or nominal consideration are measured at adjusted cost.

Additional guidance is provided on what should be included in production overheads. Under IFRS, IAS 2 has no such requirement.

Events after the Reporting Period

The difference primarily relates to dividend disclosure.

IFRS: Under IAS 10, Dividends declared after the year-end are not recognised but disclosed in the notes.

UK GAAP: Dividends declared after the year-end are not a liability but may be presented as a separate part of equity.


IFRS: IFRS 16 does not, for lessees, distinguish between finance and operating leases but requires nearly all leases to be recognised in the statement of financial position. There are exemptions for short leases and leases of low-value assets.

UK GAAP: FRS 102 makes a distinction, for lessees, between finance leases (substantially all the risks and rewards of ownership transferred) and operating leases (all other leases).

Discontinued Operations & Assets Held For Sale

IFRS: Discontinued operations are presented as a single line in SPL. The analysis appears in a note or statements of comprehensive income. Assets are classified as 'held for sale if they meet the criteria.

UK GAAP: Discontinued operations are presented in a separate column from continuing operations. No equivalent concept, so it continues to depreciate until the sale.

Revenue from Contracts with Customers

IFRS: IFRS 15 adopts a five-step approach to revenue recognition.

Revenue is recognised as or when the performance obligation(s) is/are satisfied (Step 5).

UK GAAP: FRS 102 does not contain the five-step approach. It focuses on the issue of control, which is only one aspect of Step 5 under IFRS 15. Control under FRS 102 focuses on transferring risks and rewards.

The Effects of Change in Foreign Exchange Rates

IFRS: Under IAS 21, Cumulative foreign exchange differences are shown as a separate equity component.

UK GAAP: No such requirement.

Borrowing Costs

IFRS: IAS 23 requires capitalisation of borrowing costs when criteria are met.

UK GAAP: Entities can choose whether to capitalise borrowing costs or recognise them as an expense incurred.

Intangible Assets

Development Expenditure: Under IAS 38, it's mandatory to capitalise on development expenditure when criteria are met. , while under UK GAAP, there is an option to capitalise on development expenditure

Useful lives: IAS 38 permits both intangible assets with finite and indefinite useful lives. In UK GAAP, All intangible assets have a finite useful life. It should be at most ten years if no reliable estimate can be made.

Summing up

If you would like to enhance your knowledge of IFRS or other financial reporting standards, take a certification course in IFRS or Diploma in IFRS books from Eduyush.com.

Leave a comment

Please note, comments must be approved before they are published

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.