Ifrs Synthesis Essay

Globalization has been changing the world. It has interconnected people, nations, and even businesses. Today´s business can share information to investors around the world thanks to the intelligent software of the actual society. Being more specific, the way in which investors and users evaluate businesses performance is through the information contemplated in their financial statements. These financial statements illustrate the current assets, liabilities, and stockholder equity a company has in order to help users take economic decisions. However, not all the companies are regulated to provide the same structuralized information around the world. Each country possesses its own accounting standard that regulates the preparation of financial statements of a company. In that way, companies’ information might differ between countries making the comparability between financial statements difficult to be implemented by users in order to assess the performance of foreign businesses. In view of the need of a globally accepted accounting standard that promotes uniform standards for worldwide financial reporting, the International Accounting Standards Committee (IASC), which then becomes replaced by the International Accounting Standard Board in 2001, was created (Cathey and Schroeder 130). The IASB issues International Financial Reporting Standards (IFRS) that stands as the set of accounting standards that prepare and present the financial

UK’s IFRSs are designed to make it easier to compare the performance of organizations in different countries, rather than each country maintaining its own GAAP, which makes such comparisons difficult. All listed EU companies have been required to use IFRSs since 2005. The adoption of IFRSs by the private sector is expected to have various benefits for both companies and investors; including (1) UK’s IFRSs will remove the need for companies with foreign subsidiaries to translate the accounts for consolidation with the parent company accounts. Also (2) it will be easier for investors to make informed decisions about the performance of companies in different countries because of the increased transparency and a better understanding of financial statements.

In a previous study on the usefulness of convergence, a comparison of firms implementing IFRS in 27 countries matched against sample of similar size and industry firms in the US found, the use of converged IFRS standard by US firms instead of US GAAP led to a more established accounting system with value relevance comparability (E.Barth, R.Landsman, Lang, & Williams, 2012, p. 6). In contrast, Jamal et al (2010) state “The need for a global accounting regulator is overstated. A global regulator is unlikely to help achieve the stated goals of comparability and consistency of financial reporting on a global basis” Based on the joint standard of IFRS15/ASU606 issued, there appears to be a compromise on both IASB and FASB’s part to include and exclude certain aspects therefore, although the gap is reduced, full convergence is far from being achieved. The decision makers at IASB therefore, due to inability to achieve the true goal of convergence, is resorted to undertake a vague position and compromise with the ‘allocation model’ (now known as ‘performance obligation’ model in the final joint standard issued) (Biondi, et al., 2014, p. 29). Nevertheless, in terms of usefulness to stakeholders, the joint standard addresses the problem arising from the original IAS18&IAS11/ASC605

In most of the countries accepting IFRS, include Continental Europe, IFRS pledge more comprehensive, accurate and timely financial statement information. Compared to unknown financial statement information from other sources, IFRS lower risk to investors. Investment professionals can forestall financial statement information from other sources, but most small investors couldn’t anticipate these information, in this case, IFRS enhancing financial reporting quality make small investors to compete better and decreases the risk. IFRS can lower the cost that investors spend on processing financial information by standardising reporting formats and eliminating international differences in accounting standards. Investors are more likely to gain from enhanced market efficiency, which can be done by decreasing the cost of processing financial information. Barriers of cross-border divestitures and acquisitions can be removed by decreasing international differences in accounting standards, this would benefit investors with enhancive takeover

The Final Staff Report is completed by the SEC Staff to summarize the discussions of six main concerns related to the consideration of IFRS adoption into the Accounting System in the United States. The Staff focuses on collecting opinions from public reviewers who are professional in different fields, from outreaching specific commenters for asking relative concerns, and from scheduling meetings with professionals such as investors, regulators, and issuers to communicate about opinions of incorporating IFRS in the U.S. and rising attentions.

It is the greatest of times for over 100 countries worldwide, why you might ask? Well, because all of these countries have decided to implement the new standards of accounting, which is International Financial Reporting Standards (IFRS). However, the United States of America is one of the few large financial powers left in the world who hasn’t totally adopted IFRS. Indeed, fully adopting IFRS in America would bring countless additional benefits instead of conflicts. Also recent evidence shows that IFRS has been experiencing success worldwide in countries that have embraced it. Many say the biggest setback for the slow movement towards IFRS in America is the transition cost associated with adoption. However, I believe fully adopting IFRS including the business transition cost would be extremely beneficial for the future of America.

The article is showing the relationship between IFRS adoption and the effect on the quality of the information in low investor protection countries. International Financial Reporting Standards (IFRS) is a set of accounting standards, developed and maintained by a not-for-profit organisation which is called International Accounting Standard Board (IASB) (http://www.ifrs.org/About-us/Pages/What-are-IFRS.aspx). The purpose of IFRS is to provide a global framework and also a general guideline to all firms such as public companies, so that they can prepare and disclose their financial statement globally. It is interpreted as it can provide the investors and other users (internal and external users) with financial statement that has ability to be compared with other company either within countries or overseas (http://www.ifrs.org/About-us/Pages/What-are-IFRS.aspx // http://searchsecurity.techtarget.co.uk/definition/IFRS-International-Financial-Reporting-Standards). It also uniting the capital market under one common reporting language and this would lead to produce high quality financial reporting across the world (ball,2006). This article has included 3 countries which in the low investor protection countries such as France, Germany and Sweden, in order to examine the effect of IFRS adoption on information quality. Besides, the three countries have different

According to Alexander et al. (2011), stakeholders around the world uses information from financial statements in their decision-making process for many different purposes and it is almost the same on how they use the information in every country. However, there can be differences on the communication that information when different types accounting standards are used. Ball defines that “IFRS are accounting rules (‘standards’) issued by the International Accounting Standards Board (IASB), an independent organisation based in London, UK” (2006, p6). Therefore, they are set of rules where public companies globally should apply to when producing financial reporting. This essay will be looking further into how local institutional and economic factors influence arise with uniform standards while preparing financial reporting in different countries. Based on the findings, this essay will conclude that it is possible to produce uniform financial reporting with uniform standards with some changes to the current IFRS.

According to current literature, the global movement to adopt International Financial Reporting Standards (IFRS) is the paramount financial reporting issue of the 21st century. More Than 100 countries in the world use IFRS as the basis of financial reporting.

With the number of countries that have switched to the International Financial Reporting Standards (IFRS) for their financial reporting, as well as the continued efforts made between the IFRS and US Generally Accepted Accounting Principles (US GAAP), it is evident that international convergence is an overall appealing idea for global reporting. With that said, for decades now US GAAP has worked with IFRS to create a universal standard; and while progress has been made to diminish variances between the standards, there are still large, if not unattainable efforts ahead of us. The hype over a proposed uniform set of global accounting standards appears to be stunted by the lost efforts in the convergence project between the US GAAP and IFRS. As the Financial Accounting Standards Board (FASB) moves forward with its standards setting, there must be a reevaluation of the goal for reporting standards and efforts with the International Accounting Standards Board (IASB).

Across the world, many businesses and markets have adopted the use of the International Financial Reporting Standards (IFRS). People and organizations in the business world are increasingly demanding conformity and this has necessitated the shift from the U.S Generally Accepted Accounting Standards to the IFRS. However, in the United States, there is still much reluctance to adopt this change and these has caused a lot of heated debate on whether the businesses and markets should conform to the rest of the world.

There are two distinct methods of accounting for finances in the business world. These two methods are the methods both prescribed by the U.S., which is known as the generally accepted accounting principles (GAAP), and that which is used by the international community known as international financial reporting standards (IFRS). GAAP is regulated by the financial accounting standards board (FASB) while IFRS is regulated by the international accounting standards board (IASB). These two methods are currently under a process which is known as convergence or harmonization so that the United States will eventually become integrated into the global community (Miller, S. E. 2009). This will cause financial statements to be more usable for more people across the globe as well as enhance citizens of the U.S.’s ability to perform business more efficiently internationally.

IFRS adoption allows companies easier access to foreign capital markets by having comparability of worldwide financial statements, which would make it easier for investors to make global investment decisions. Having a worldwide set of standards makes it easier for companies to evaluate for entities for potential acquisition, and it would also minimize cost for companies to list on foreign exchange stock markets because it would eliminate the preparation of their financials in that market’s reporting requirements. As companies are becoming more multi-national in nature, it is more important now more than ever that the U.S. SEC consider the benefits of IFRS. The U.S. SEC still requires U.S. GAAP as the reporting method for U.S. based companies that list their stock on the New York Stock Exchange. The SEC does allow foreign companies to report using IFRS standards when their securities are traded in the United States. Some argued that this would pave the way for the same right to be extended to U.S. domestic companies. So far, this has not happened. Although there are benefits to adopting IFRS such that companies will be able to increase global competitiveness, the American business community still has many reservations. The cost to adopt IFRS will be very significant. There will have to be extensive training for staff to be fully

In the major international market, there are currently only four countries do not require IFRS rules, and they are China, Japan, India, and the US. Pacter (2015) explained that presently there are one hundred and forty jurisdictions around the world need to have the completion of IFRS, and one hundred and sixteen countries require IFRS as their account rule. The IFRS can affect American business in many ways. The development of international business bring more and more non-US shareholders to American firms, and the potential stockholders may wish to have an IFRS financial statement to view the financial situation of the company. IFRS reports are moreover significant when American companies looking for buyers or capital in European countries. The understanding of the similarities and differences of GAAP and IFRS can give an assistance to these investors and investees to have a

The purpose of it was to bring more comparability and transparency in financial reporting and a greater participation in the global financial markets. Such standards would facilitate comparisons among companies, financial performance across countries and increase efficiency in the allocation of resourcing.