How to read an accounting standard

Reading a standard cold can feel like reading a contract: dense, cross-referenced and full of defined terms. It gets much easier once you know how standards are built and which parts to read first. This guide gives you the anatomy of both an IFRS standard and a US GAAP topic, and a reading method that works for either.

By Awais Jameel, Chartered Accountant. Reviewed by Mirza Fahad Baig, Chartered Accountant. Checked against official sources on . 4 minute read.

Short answer

To read an accounting standard, start with its scope and definitions, then its core requirements. An IFRS standard is built around an objective and scope, definitions, recognition, measurement, presentation, disclosure and transition, with appendices for defined terms and application guidance that carry full authority. Illustrative examples and the basis for conclusions accompany the standard but are not part of it. A US GAAP topic is organised into numbered sections that are the same in every topic, such as 15 for scope, 25 for recognition and 50 for disclosure.

At a glance

IFRS main text
Objective to transition
Authoritative appendices
Defined terms, application guidance
Not authoritative
Examples, basis for conclusions
Bold paragraphs
Same authority as plain
ASC sections
Same numbers in every topic
Read first
Scope and definitions
How to read an accounting standardIFRS main text: Objective to transition; Authoritative appendices: Defined terms, application guidance; Not authoritative: Examples, basis for conclusions; Bold paragraphs: Same authority as plain; ASC sections: Same numbers in every topic; Read first: Scope and definitions.KEY FACTS AT A GLANCEHow to read an accounting standardIFRS main textObjective to transitionAuthoritative appendicesDefined terms,application guidanceNot authoritativeExamples, basis forconclusionsBold paragraphsSame authority as plainASC sectionsSame numbers in everytopicRead firstScope and definitionsChecked against official sourcesTax BakersHow to read an accounting standardIFRS main text: Objective to transition; Authoritative appendices: Defined terms, application guidance; Not authoritative: Examples, basis for conclusions; Bold paragraphs: Same authority as plain; ASC sections: Same numbers in every topic; Read first: Scope and definitions.KEY FACTS AT A GLANCEHow to read an accounting standardIFRS main textObjective to transitionAuthoritative appendicesDefined terms, application guidanceNot authoritativeExamples, basis for conclusionsBold paragraphsSame authority as plainASC sectionsSame numbers in every topicRead firstScope and definitionsChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

How is an IFRS standard put together?

The anatomy of an IFRS standardThe anatomy of an IFRS standardObjective and scopeWhat the standard is for and what it coversRead firstDefinitionsAppendix A: the meaning of key wordsAuthoritativeRequirementsRecognition, measurement, presentation, disclosureAuthoritativeApplication guidanceAppendix B: how to apply the requirementsAuthoritativeExamples and basisIllustrations and the board's reasoningNot authoritative
Read from the top down: scope and definitions answer many questions before the detail.
PartWhat it doesAuthority
ObjectiveStates what the standard is trying to achievePart of the standard
ScopeSays which transactions it covers and which it excludesPart of the standard
Recognition, measurement, presentation, disclosureThe core requirementsPart of the standard
Appendix A: defined termsThe meaning of words used in the standardPart of the standard
Appendix B: application guidanceHow to apply the requirements in practicePart of the standard
Effective date and transitionWhen it applies and how to switch to itPart of the standard
Illustrative examples, implementation guidanceWorked cases showing the requirements in useAccompanies the standard, not part of it
Basis for conclusionsWhy the board decided what it didAccompanies the standard, not part of it

Two details catch people out. First, paragraphs printed in bold state the main principles, but plain paragraphs have the same authority. Second, the structure varies a little between standards, so check each standard's own introduction for which appendices form part of it.

How is a US GAAP topic put together?

Every Codification topic uses the same section numbers, so once you know them you can find the scope or the disclosure rules in any topic without searching:

SectionContentsIFRS equivalent
15Scope and scope exceptionsScope
20GlossaryAppendix A, defined terms
25RecognitionRecognition
30 and 35Initial and subsequent measurementMeasurement
45 and 50Presentation and disclosurePresentation and disclosure
55Implementation guidance and illustrationsApplication guidance and examples
65TransitionEffective date and transition

Unlike IFRS, implementation guidance in Section 55 is part of the authoritative Codification. The FASB's reasoning sits outside it, in the basis for conclusions of each Accounting Standards Update. See what is US GAAP.

How do paragraph references work?

  • IFRS: standard number, then paragraph. "IFRS 15.9" is paragraph 9 of IFRS 15. Application guidance carries a B prefix, such as IFRS 15.B34.
  • US GAAP: Topic-Subtopic-Section-Paragraph. "ASC 606-10-25-1" is Topic 606, Subtopic 10, Section 25, paragraph 1.

A method for reading any standard

  1. Check you have the right version. Confirm the effective date and any amendments, and which version your jurisdiction has adopted.
  2. Read the scope. Many questions are answered here: if the transaction is out of scope, another standard applies.
  3. Read the definitions. Words such as "lease", "control" or "probable" have precise meanings that change the answer.
  4. Find the core principle. Write it in one sentence in your own words.
  5. Read the recognition and measurement requirements, using the application guidance alongside.
  6. Work through an example from the illustrative examples or Section 55, then try one of your own.
  7. Read the disclosures last, as a checklist of what the user of the financial statements needs to know.

An example: is this contract a lease?

A company rents dedicated fibre capacity on a telecom network for five years and wants to know whether IFRS 16 applies.

  • Scope: IFRS 16 covers all leases, with listed exclusions; network capacity is not excluded, so read on.
  • Definitions: a lease conveys the right to control the use of an identified asset for a period in exchange for payment.
  • Application guidance: a capacity portion of a larger asset is an identified asset only if it is physically distinct or represents substantially all of the asset's capacity. Dedicated, physically distinct fibres can qualify; a share of capacity on shared fibres generally does not.
  • Answer: if the fibres are dedicated and physically distinct, and the customer directs their use, the contract contains a lease. If not, it is a service contract.

The answer came from reading scope, definitions and application guidance in that order, which is the method above.

Where to go next

Keep the list of IFRS standards and the list of ASC topics open as a map, and follow the study roadmap.

Need help applying the standards?

Our Chartered Accountants help finance teams and students apply IFRS and US GAAP to real transactions.

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Questions people ask

Which parts of an IFRS standard are authoritative?

The main text and the appendices that form part of the standard, usually defined terms, application guidance and transition. Illustrative examples and the basis for conclusions are not.

Do bold paragraphs in IFRS have more authority?

No. Bold paragraphs state the main principles, but plain paragraphs have equal authority.

Where is the scope in a US GAAP topic?

In Section 15 of each subtopic, for example ASC 842-10-15.

What should I read first in a new standard?

The scope and the definitions, because they often decide whether and how the standard applies.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: Who uses IFRS Accounting Standards?
  2. Financial Accounting Standards Board: Accounting Standards Codification

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

Accounting standardsAccounting standards study roadmap for ACCA, CA and CPA studentsAccounting standardsWhat is IFRS? A plain-English introductionAccounting standardsWhat is US GAAP? How the Codification works

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This guide is general information. It is not tax or legal advice for your situation.