The International Financial Reporting System

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Globalization is a phenomenon that keeps increasing with a rapid pace. The effects of globalization are reflected into the world of financial reporting as well. During the last decades, the need for a single set of accounting standards around the world has risen. The idea of having mutual accounting standards has been an issue with controversial opinions. Many academics have expressed their opinion but there has been a separation between them as some of them believe that the benefits are significant and it definitely needs to happen and others believe that it is not as good as it seems. In the following essay there is going to be a discussion about the advantages and disadvantages of having a single set of accounting standards around…show more content…
Some countries like the USA still refuse the implement the IFRS as they believe it will not give benefit to the country and for the reasons mentioned below. Because of this decision of the USA, some other countries have not continued to the implementation of IFRS yet. The advantages of implementing a common language of financial reporting all around the world, like IFRS, are thought to be many and all of them very significant. One of the most important is the enhanced comparability between the financial reports of different companies in different countries (Jeanjean and Stolowy,2008). By implementing IFRS internationally, investors will have the opportunity to compare international firms between them and help them identify the most appropriate investing opportunity for them. With diversity in accounting standards, an investor will find it very difficult to understand the differences between the different accounting standards (Hicks, 2012). Not being able to compare international companies, may lead to unfortunate investments as the investor will not be able to see and understand the differences between them. Also, by making the financial reports more comparable, the costs of comparing companies in different countries will be reduced (Jeanjean and Stolowy,2008 ). This is a significant benefit to an investor as when they have to compare international companies which use different accounting standards they might need to hire an analyst which can
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