Advantages, disadvantages and difficulties of applying IFRS in Azerbaijan Republic will be discussed in this section.
Advantages can be grouped in two parts: Benefits of implementation of IFRS to the country; and to the organizations.
“The main purpose of the of the state regulation of accounting in the Azerbaijan Republic is to provide the transparency of financial statements and development of the accounting in the country on the basis of international standards by developing and implementing the IFRS and NAS based on them for commercial organizations and the NAS based on International Public Sector Accounting Standards for non-commercial organizations.” By changing its accounting law, Azerbaijan admitted the significance of high quality financial reporting for the economical development. Acceptance of IFRS in Azerbaijan is helpful to economic growth and stable financial system. It will attract foreign investment to the country. Another advantage of implementing the IFRS in Azerbaijan is international integration. That’s national companies which operate globally can compete with other companies in the world. * Public organizations in Azerbaijan can compete fairly with the same type of financial statements. * Stock exchange market is not developed in Azerbaijan. Applying IFRS in Azerbaijan would result in a more developed stock exchange market in Azerbaijan. The application of IFRS is beneficial to the organizations to find new funds. First of all, it provides transparency in financial reporting because of disclosure notes. These notes are one of the common information sources for investors in decision making. Lack of disclosure notes will result in less transparent financial reports. Financial statements which are prepared according to IFRS will provide more comprehensive and accurate financial information.
* Besides these implementation of IFRS has several advantages to companies such as, founding new funds, effective usage of resources, easily decision making, understandability, comparability. * Companies in Azerbaijan generally are state owned or funded by its owners. There are so few public organizations which sell their shares. Although Baku Stock Exchange operates since 2008 the number of people or companies who want to buy shares is low. That’s mainly because of lack of information about companies’ profit, loss, assets and liabilities. If companies start using IFRS and make their financial statements according to these standards they will probably find new buyers of their shares, and this means a new fund for financing. . The major driver behind this process is the desire to borrow from European lenders who require audited IFRS financial statements. They had already adopted additional reporting requirements in order to be recognized on the world market. *
* By the implementation of IFRS companies can use its resources effectively. There are unearned revenues and prepaid expenses which companies should recognize when they really occur. However, in traditional accounting the revenues and expenses recognized when they are paid. * By using IFRS can prepare more understandable and useful financial statements and use them for decision making. * On the other hand there are certain disadvantages implementation of IFRS have. The conversion of accounting system is not a straightforward process. During the transition, entities might face some problems. These problems are more evident in the accounting systems that are more different from the accounting system to be adopted. As previous chapters noted, Azerbaijan accounting policies and procedures are different from IFRS/IAS, and in some cases the comparison of both regulations is not applicable due to the absence of similar applications. Thus, an entity in the conversion process is to face the problems associated with the application of * IFRS/IAS or NAS regulations. These problems can be grouped as follows: Transition to IFRS is a...
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