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Accounting and Business Research, International Accounting Policy Forum. pp. 5-27. 2006 5 International Financial Reporting Standards (IFRS): pros and cons for investors Ray Ball* Abstract—Accounting in shaped by economic and political forces. It follows that increased worldwide integration of both markets and politics (driven by reductions in communications and information processing costs) makes increased integration of financial reporting standards and practice almost inevitable. But most market and political forces will remain local for the foreseeable future, so it is unclear how much convergence in actual financial reporting practice will (or should) occur. Furthermore, there is little settled theory or evidence on which to…show more content…
I shall try to shed some light on the topic but, as the saying goes, only time will tell. 1.1. Outline I begin with a description of IFRS and their history, and warn that there is little settled theory or evidence on which to build an assessment of the advantages and disadvantages of uniform accounting rules within a country, let alone internationally. The pros and cons of IFRS therefore are somewhat conjectural, the unbridled enthusiasm of allegedly altruistic proponents notwithstanding. I then outline my broad framework for addressing the issues, which is economic and political. On the ‘pro’ side of the ledger, I conclude that extraordinary success has been achieved in developing a comprehensive set of ‘high quality’ standards and in persuading almost 100 countries to adopt them. On the ‘con’ side, a deep concern is that the differences in financial reporting quality 6 ACCOUNTING AND BUSINESS RESEARCH that are inevitable among countries have been pushed down to the level of implementation, and now will be concealed by a veneer of uniformity. The notion that uniform standards alone will produce uniform financial reporting seems naïve, if only because it ignores deep-rooted political and economic factors that influence the incentives of financial statement preparers and that inevitably shape actual financial reporting practice. I envisage
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