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Introduction. This Essay Will Critically Evaluate The Adoption

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Introduction

This essay will critically evaluate the adoption of International Accounting Standards by UK companies. IAS (International Accounting Standards) created by IASC (International accounting standards committee) are a set of standards stating how particular types of transactions and other events should be reflected in financial statements. Since 2001 the IASB (International Accounting Standards Board) succeeded the IASC to create the IFRS (International Financial Reporting Standards) which are “a single set of accounting standards, developed and maintained by the International Accounting Standards Board (the Board) with the intention of those standards being capable of being applied on a globally consistent basis—by developed,
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For UK companies this makes it easier and cheaper from them to raise capital from investors across the globe. Rolls Royce PLC chief financial officer David Smith has said “At the same time, the change to aftermarket accounting, particularly in Civil Aerospace, reinforces our focus on cash flows, as we look to improve further our strong reputation for customer service by maximising engine availability while minimising cost.” (Smith, 2016).

International Compatibility

Using IFRS detaches a business from the constraints of the national-level accounting standards and automatically makes financial reports acceptable in IFRS-compliant countries. This will also reduces cost significantly for UK companies as they will not need to prepare alternative financial reports when pursuing business interests in other countries, furthermore this will help foreign subsidiaries. An example of a UK based company that uses IFRS is Marks and Spencers (M&S Financial Report 2016, 2017). This company operates a large amount of subsidiaries both in the UK and EU, with over 1,382 stores worldwide, and therefore has adopted the IFRS standards to allow easier trading within these nations. While UK GAAP is still popular for many UK companies, adopting IFRS will reduce the need for M&S to prepare separate accounts for each subsidiary it owns (M&S Financial Report 2016, 2017). Having this capability increases competition as companies with the same accounting standards have
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