IFRS: A Review of the Literature
Intermediate Accounting III (10089)
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.
IFRS: A Review of the Literature
Over the past 35 years financial regulators worldwide have proposed and worked toward establishing an international standard of financial reporting. The need for such a standard has never been disputed but how to adopt has been the question. More than 100 countries have already adopted or converged with IFRS. The United States is still using Generally Accepted Accounting Principles (GAAP). James Turley, chairman and CEO of Earnest and Young states, ”In the last 18 months, we relearned how globally connected we all have become… It is absolutely imperative to have one global standard”. (cited in Money Management Executive, 2009). Examining the progress of establishing IFRS as the global standard requires the study of its history, convergence and adoption level of other countries and confirmation of need. History
International Financial Reporting Standards (IFRS) are principal based standards that are issued by the International Accounting Standards Board (IASB). IFRS include International Accounting Standards (IAS) that were issued between 1973 and 2001 by the International Accounting Standards Committee (IASC). In April of 2001 the IASB took over the responsibility for setting International Accounting Standards. The International Accounting Standards Board website has provided a timeline of the history of IFRS. In June of 1973 the International Accounting Standards Committee (IASC) was formed by Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom, Ireland and the United States. Additional members joined including Nigeria and South Africa. By 1982 the IASC members comprised the International Federation of Accountants (IFAC). Italy and Taiwan joined the Board in 1983 and 1984. In1986 there was a joint conference with the New York Stock Exchange and the International Bar Association on globalization of financial markets. By 1987 the first IASC Bound Volume of International Accounting Standards (IASs) was completed and in 1988 Jordan, Korea and Nordic Federation replaced Mexico, Nigeria and Taiwan on the Board. In the same year Canadian Accounting Standards Board worked with the IASC on the financial instrument project and IASC published a survey on the use of IASs. In 1993 the International Organization of Securities Commissions (IOSCO) endorsed IAS 7, Cash Flow Statements and ten revised IASs were approved for the comparability and improvements project. In 1994 the SEC accepted three IAS treatments and IAS 7. IOSCO accepted 14 IASs but rejected step-by-step endorsement. In 1996 The United States Congress called for generally accepted international accounting standards. Australian Stock Exchange agreed to a harmonization of Australian standards with IASs. In 1997 the People’s Republic of China joined IASC as an observer and in 1998; large companies in France, Germany and Italy were allowed to use IASs domestically. In 2001, the European Commission began legislation to require the use of IASC Standards for listed companies by 2005. On April1, 2001, the IASB assumed responsibility for setting accounting Standards (International Accounting Standards Committee).
In March of 2002, the European Union (EU) mandated that EU companies listed on an EU exchange apply IFRS when preparing their financial statements...