The adoption of IFRS around the world is occurring rapidly to bring about accounting quality improvement through a uniform set of standards for financial reporting. However, accounting quality is a function of the firm’s overall institutional setting, including the legal and political system of the country in which the firm resides. This paper documents the prospects of IFRS adoption and their impact on the financial reporting environment of Bangladesh considering the underlying institutional and economic factors. It argues about trade-off between the scale advantage of IFRSs (designed globally by the highly sophisticated authority) and the local advantage of decentralized adaptation. It is also an effort to focus on the problems relating to adoption of IFRS in Bangladesh and to reach some concluding remarks for better applicability of accounting standards in ensuring transparent information environment. The Institute of Chartered Accountants of Bangladesh (ICAB), which is an apex body for the development of accounting profession in Bangladesh, has been working for the adoption and improvement of accounting standards. The ICAB has a program to adopt IAS as Bangladesh Accounting Standards (BAS). The Securities and Exchange Commission (SEC) of Bangladesh requires the issuers of listed securities to prepare financial statements in accordance with the requirements laid down in the Regulation and the IASs as adopted by the ICAB.
IFRS are accounting rules (“standards”) issued by the International Accounting Standard Board (IASB), an independent organization based in London, UK. Before the inception of IASB, international standards were issued by the IASB’s predecessor organization, the IASC, a body established in 1973 through an agreement made by professional accountancy bodies from Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland, and the United States of America. Up to 2000, the IASC’s rules were described as “International Accounting Standards” (IAS). In fact, in 1997 after nearly 25 years of achievement, IASC recognized that to continue to perform its role effectively, it must find a way to bring about convergence between national accounting standards and practices and high-quality global accounting standards. In late 1997 IASC formed a Strategy Working Party that published a discussion paper in December 1998 and final recommendations in November 1999. The IASC Board approved the proposals in December 1999, and the IASC member bodies did the same in May 2000. The new standards-setting body was named as International Accounting Standards Board (IASB) and since April 2001, it has been performing the rule-making function. Components of IASB structure contain- IASB, IASC Foundation, International Financial Reporting Interpretations Committee (IFRIC), previously Standing Interpretations Committee, SIC under IASC), Standards Advisory Council (SAC) and Working Groups. The IASB is better funded, better-staffed and more independent than its predecessor. The IASB describes its rules under the new label “International Financial Reporting Standards (IFRS), though it continues to recognize (accept as legitimate) the prior rules (IAS) issued by the old standard-setter (IASC).
Over the years the business community has admitted that the accounting is “the language of business” and financial information is a form of language. And undoubtedly, to ensure its usefulness, financial information should not only be intelligible, but also be comparable so that investment and credit decisions can more readily be taken. Over the past few decades, the accounting profession has been facing the pressure of globalization and continuously seeking the way to present financial situations using unique accounting procedures which can be understood by the entire business community. Due to the fact that this process followed the global trends, and the...