Adoption of Ifrs
ADOPTION OF IFRS: IT`S BENEFITS AND IMPACTS ON FIRMS AND COUNTRIES AROUND THE WORLD
The IASB was established in 2001 and since have assumed the responsibility of the standard setting from its predecessor body, the International Accounting Standards Committee (IASC) and began issuing International Financial Reporting Standards (IFRS). IFRS has recently been dominating the regulatory changes in accounting for listed companies around the world. Through the years, over 100 countries have adopted IFRS reporting, some of which include Australia, the European Union, India, Japan, South Africa, Russia and most recently Canada. In addition, the U.S. Securities and Exchange Commission (SEC) are working towards the final element of a work plan to incorporate IFRS into the U.S. financial reporting jurisdiction. In November 2007, the SEC voted to allow foreign issuers that report in IFRS to file their financial statements with the SEC without reconciling to U.S. generally accepted accounting standards (GAAP). Accounting standard setters anticipate that the use of IFRS will improve the comparability of financial statements, improve reporting transparency, and increase the quality of financial reporting which in turn will lead to greater investor confidence. From an economic perspective, some believe that it’s challenging to perceive that such expectations will be achieved as a result of converting to IFRS. However according to proponents of IFRS, publicly traded companies believe that applying these principles will allow for a single set of high quality accounting standards as this will contribute to better functioning of the capital markets (Quigley 2007). In the following paper I will discuss the reasons why firms around the globe have adopted IFRS in relation to the financial reporting and disclosure quality, comparability across firms and countries, and the costs and benefits associated with reporting improvements.
Most countries are in favor of adopting IFRS, from the
The IASB was established in 2001 and since have assumed the responsibility of the standard setting from its predecessor body, the International Accounting Standards Committee (IASC) and began issuing International Financial Reporting Standards (IFRS). IFRS has recently been dominating the regulatory changes in accounting for listed companies around the world. Through the years, over 100 countries have adopted IFRS reporting, some of which include Australia, the European Union, India, Japan, South Africa, Russia and most recently Canada. In addition, the U.S. Securities and Exchange Commission (SEC) are working towards the final element of a work plan to incorporate IFRS into the U.S. financial reporting jurisdiction. In November 2007, the SEC voted to allow foreign issuers that report in IFRS to file their financial statements with the SEC without reconciling to U.S. generally accepted accounting standards (GAAP). Accounting standard setters anticipate that the use of IFRS will improve the comparability of financial statements, improve reporting transparency, and increase the quality of financial reporting which in turn will lead to greater investor confidence. From an economic perspective, some believe that it’s challenging to perceive that such expectations will be achieved as a result of converting to IFRS. However according to proponents of IFRS, publicly traded companies believe that applying these principles will allow for a single set of high quality accounting standards as this will contribute to better functioning of the capital markets (Quigley 2007). In the following paper I will discuss the reasons why firms around the globe have adopted IFRS in relation to the financial reporting and disclosure quality, comparability across firms and countries, and the costs and benefits associated with reporting improvements.
Most countries are in favor of adopting IFRS, from the
References: 1. Bielstein , 2007. How the IFRS movement will affect financial reporting in the U.S.: Article: KPMG 2 3. Lang, Maffet and Owen, 2010. Earnings Movement and Accounting Comparability, the Journal of Accounting Research 4 5. Luez and Wysocki, 2008. Economic Consequences of Financial Reporting and Disclosure Regulation, Journal of Accounting Research 6 7. Ray Ball, 2006. International Financial Reporting Standards (IFRS): Pros and Cons for Investors, Journal of Accounting Research 8 9. Standsih, 2003. Evaluating National Capacity for Direct Participation in International Accounting Harmonization, Journal of Accounting Research 10 11. William R. Scott, Fifth edition , 2009. Financial Accounting Theory