International financial reporting standards (IFRS) represent a set of generally accepted accounting principles (GAAP) used by companies to prepare financial statements, a critical source of information published annually, at a minimum, and useful to various stakeholders (shareholders, debtors, clients, employees and governments) in understanding a company's financial performance and management’s stewardship of the company’s resources.
Developed by the International Accounting Standards Board (IASB), these are a set of accounting rules followed by, or being adopted by, more than 100 countries. All member states of the EU are required to use IFRS as adopted by the EU for listed companies since 2005.
All other major economies have initiated a process to consider convergence or adoption of IFRS in the near future, even the United States (US GAAP as developed by the Financial Accounting Standards Board (FASB) - being the other most important set of financial reporting standards) where cross-listed firms on the US stock markets have been permitted to file statements prepared under IFRS since 2007.
With the increasing globalisation of financial markets and of companies, the use of a single set of financial reporting standards across countries is viewed as having increased the comparability of financial statements across borders. It also reduces the cost of preparing the consolidated financial statements of groups made up of companies conducting business all around the world.
Financial reporting standards have been in the spotlight since the banking crisis, more specifically those requiring the measurement of financial assets and liabilities at fair value. In September 2009, G20 leaders in Pittsburgh asked the accounting standard setters IASB and, its US counterpart, the FASB to work towards a single set of high quality global accounting standards by June 2011. Convergence, however, is proving challenging and is likely to be pushed back. 
Initially, IFRS begun as an academic project aimed at creating a single set of global standards, their actual use was kick-started by the European Union. 
An EU regulation requires listed companies in Europe to adhere to International Financial Reporting Standards (IFRS) from financial years commencing on or after 1 January 2005 when preparing their consolidated accounts. In implementing this in UK legislation the Government has not yet made the use of IFRS compulsory for any further categories of accounts, but the legislation permits all companies to use them for individual and consolidated accounts if they wish.
Changes have been made to UK tax legislation to accommodate these new rules for tax purposes.