The International Accounting Standards Board (IASB) enforced the harmonization of the accounting standards into a single set of accounting standards that is to be used globally in the preparation of financial statements and is called the International Financial Reporting Standards (IFRS). This essay will discuss the benefits of developing the IFRS, which is to enhance and increase the quality of the companies’ financial statements through transparency and comparability, value relevance, timely loss recognition by presenting evidence from Spain and Bahrain. Other benefits include facilitating cross-border investments; reducing equity cost, and decreasing earnings management. Hence, this allows companies to provide information that will be …show more content…
Implementing the IFRS around a large number of countries is essential for enhancing the accounting quality of the financial statements and any disclosed information that are provided by companies to their users. Presenting informational with better quality is achieved by increasing transparency, comparability, value relevance and timely loss recognition.
As for the level and quality of transparency of financial statements, companies operating under the standards of their local Generally Accepted Accounting Principles (GAAP) may continues to present information that may be false and asymmetric. However, other companies that are committing to the IFRS will continue to present information that is clear and understandable (Horton, Serafeim and Serafeim, 2008). The adopted reporting standards require information that is more qualitative and quantitative to be attached to the disclosure of financial statements, which was not highly required by local GAAP (Wright and Hobbs, 2010, p. 23). To increase transparency, “it requires companies to disclose accounting policies, judgements and estimates, as well as additional qualitative and quantitative information related to significant accounting transactions” (Wright and Hobbs, 2010, p. 22). Reporting the substance of transactions by commenting on the realities of what the entities or companies present regarding information about
IASB. 2010, "The Conceptual Framework for Financial Reporting" IFRS, pp. A21- A38, viewed 23 April 2014,
As the responsibilities of the global harmonization of accounting standards IFRS and GAAP transfer to IASB, FASB’s influence is waning. Advantages of the convergence include high quality financial reporting, which lowers cost of capital for investors and the cost of borrowing for companies. However, there are disadvantages to be noted, such as the costs of introducing IFRS to current and potential accountants and the risk of reducing the uniformity of financial reports due to the lax rulings of IFRS, which promotes earnings management amongst companies. Although arguments regarding the convergence remain prevalent, the completion of IFRS and GAAP is inevitable. Come year 2015, accountants, investors, and companies alike will discover whether or not the pros outweighed the cons; or vice versa.
International financial reporting standards (IFRS) are the attempt of the International Accounting Standards Board (IASB) to globally harmonize accounting standards and financial reports (Doupnik & Perera, 2014). Such standards are principles developed by the IFRS foundation and the IASB whose goal are to implement international accounting standards (IAS) which promote transparency, accountability, and efficiency of financial reporting to ensure organizations draft financial reports that are comparable internationally (IFRS Foundation, 2015). In an effort to facilitate the adoption of IFRS, accounting professional bodies worldwide such as the Institute of Chartered Accountants of Scotland (ICAS) have implemented initiatives to guide and train their members in understanding the new standards adopted within their espective country.
(Horton et al., 2013) stated that the adoption of IFRS (IFRS) requires changes in the financial and accounting area, in most systems and processes, as well as in the area of human resources companies. The accounting policies in accordance with international standards are definite principles, techniques, sources, agreements and practices implemented by an enterprise in preparing and presenting financial statements IFRS IFRS-audited according to IAS and ISA-COSO internal control, putting in operation and economic good accounting for disclosure of general purpose accounting information
The use of play and creativity are vital in DMT. Looking specifically at children, psychologist Vygotsky saw the value of play for children as a way for them to learn and to engage and try to figure out how the world/environment around them work through the use of play (Moran & John-Steiner, 2003). Giving the child a chance to play allows the child to expand their imagination, try different roles, and work on socialization with others. Play can also change and develop as the child develops as well. By the time a child is in school, play can be seen as, “… an early mechanism for self-mastery: ‘A child’s greatest self-control occurs in play’” (Vygotsky, 1978, p.99 as cited in Moran & John-Steiner, 2003, p. 69). The use of play and creativity
Due to the global integration of business and finance throughout the world, approximately 113 countries have adopted or are working on convergence with IFRS. This paper is a look at the history and an examination of where IFRS stands internationally and with the United States. For several decades the industrialized world has been working toward an international set of accounting standards. Since IFRS has become the de facto international accounting language, it is logical that it will be accepted as that standard in the near future.
The chief objective of this report is to describe the advantages and disadvantages of International Financial Reporting Standards (IFRS) conceptual framework in general. The report also directs attention towards Australia’s step towards harmonization of the accounting standards and as well as on international financial reporting system. However, the prime focus of the report is on the adoption, implementation and the impact of IFRS framework in a developing country, Bangladesh. The very report advocates that the adoption and implementation of IFRS framework has both positive and negative sides. In spite of financial and time constraints in adopting IFRS every nation is keen towards being a member of IFRS accounting standards. It is because countries want to trade globally and for such purpose they need investors. In order to attract and retain such potential and existing investors firms/organization need to follow certain accounting standards in generating the financial reports that are accepted worldwide. Finally, the report concludes that the worldwide harmonization of accounting standards has many future benefits along with some short term obstacles, however, it is difficult to apply the same accounting standards worldwide as each and every country differs from another in respect of its enforcement mechanism.
The International Accounting Standards Board (IASB) is an independent body which approves and develops International Financial Reporting Standards (IFRS). They work under the oversight of the IFRS. The IASB was formed back in 2001 to replace the International Accounting Standards Committee. (www.iasplus.com,2015)
According to Delloite (http://www.iasplus.com/en/resources/ifrsf/due-process/background-to-ifrs)”The International Accounting Standards Board (IASB) is an independent non-profit organization that develops and approves International Financial Reporting Standards (IFRSs)”. In mainly usage, the term 'International Financial Reporting Standards ' (IFRSs) has both a narrow and a broad meaning. Firstly, IFRSs refers to the new numbered series of pronouncements that the IASB is issuing, as distinct from the International Accounting Standards (IASs) series issued by its predecessor. More broadly, IFRSs refers to the entire body of IASB pronouncements, including standards and interpretations approved by the IASB and IASs and SIC at 2001 interpretations approved by the predecessor International Accounting Standards Committee.” The IASB has all responsibilities for the technical matters of the IFRS Foundation. The objective of financial reporting is the foundation of the conceptual framework. Other aspects of the framework - qualitative characteristics, elements of financial statements, recognition and measurement - will build on that foundation with the aim of ensuring that financial reporting achieves its objective. The goal of IFRS as said at (source) is”to develop a set of high quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles”. To surmount these difficulties and still connect accounting to
With the globalization of international trades, it is necessary to design a common accounting language to compare the financial performance of companies from different countries. For this reason, International Accounting Standard Board (IASB) publish the International Financial Reporting Standards (IFRS) which are principle-based in order to improve the quality of financial reporting and to harmonize accounting standards in 2001.
The U.S Generally Accepted Accounting Principles and the International Financial Reporting Standards are the two major accounting standards used by accountants today. The GAAP is currently used only by firms in the United States, while the IFRS is used by firms in 110 countries, including those in the European Union. The U.S Securities and Exchange Commission is in charge of GAAP for public companies, while the Financial Accounting and Standard Board overlooks private companies. The standards for IFRS are set by the International Accounting Standard Board. The main difference that separates the GAAP and the IFRS is that the GAAP was constructed based on rules, while the IFRS was created based on accounting principles. Although there are many similarities in the way most things are done, there are also striking differences regarding the way financial statements are reported, including inventory valuation, balance sheets presentation, asset definition, etc. This paper seeks to identify some of the major discrepancies between GAAP and IFRS, and present arguments people have made for and against converging the two standards.
Capital markets are becoming more global and the needs for accounting standards on a global level have been the one thing companies have been struggling to understand for years. The International Financial Reporting Standards (IFRS) has the capabilities to provide these standards a level that investors and auditors can better interprets all over the world. Businesses have been questioning if the GAAP is going to be replaced by the IFRS. Many organizations have gotten so content with what the GAAP has offered that transitioning over to the IFRS may be resisted by
IFRS is an international accounting standards that were developed by the International Accounting Standards Board (IASB). These standards define how a company should report its financial statements based on accounting principle rather than “rules-based accounting standard” like US GAAP (Dumont, 2012). According to AICPA, IFRS standards can help businesses to have the same financial statements like their competitor as well as attracting foreign investors. In addition, a company that has subsidiaries in different countries would have a uniform financial statements company wide. However, convergent process can pose a serious issue for U.S. businesses in terms of financials and internal controls due to the fact that US GAAP focuses more on details for reporting purposes. Many U.S. companies believe that US GAAP is the golden rule and the huge amount of converting cost would offset the benefits that IFRS offers (AICPA, 2015).
IFRS is a general global financial language for business affairs that’s understandable globally and comparable across the international boundaries. IFRS initially was formed to harmonize accounting across European Union, but the value of harmonization was so overwhelming and attractive around the world that became a benchmark globally.
Under the lead of the IASB, countries have implemented or are in the process of adopting IFRSs as they seek to develop a single set of high quality, understandable, enforceable and globally recognised financial reporting standards based on clear articulated principles (IFRS Foundation, 2014). Unfortunately regulations have failed to achieve the desired outcome for a number of reasons. Firstly argued by Elliott and Elliott (2012) information overload is a key factor, as they state standards are too detailed when rule-based and too vague when principle-based leading to a lack of clarity and increased confusion, which in turn, leads them to question the usefulness of IFRS. Secondly, the business environment occurs at the rapid pace with millions of transactions taking place around the world. As business develops and becomes increasingly complex, the legislation process too becomes prolonged when revising outdated or implementing new standards. Lastly, professional judgement is required if there is no standard created for a particular transaction or if a particular standard requires the use of judgement i.e. IFRS 15 – Revenue from contracts with customers. According to IFRS, income can be split into revenue and gains, however defined, one accountant may deem a certain transaction as revenue whereas another accountant may see it as a gain. As professional judgement is required, it is important to note the IASB framework should be consulted