Not Globally Accepted
The United States has not yet adopted International Financial Reporting Standards and other countries continue to hold out as well. This makes accounting by foreign-based companies that do business in America difficult as they often have to prepare financial statements using IFRS and another set using American Generally Accepted Accounting Principles.
IFRS uses a principles-based, rather than rules-based, philosophy. A principles-based philosophy means that the goal of each standard is to arrive at a reasonable valuation and that there are many ways to get there. This gives companies the freedom to adapt IFRS to their particular situation, which leads to more easily read and useful statements.
There is a downside to the flexibility that IFRS allows: companies can utilize only the methods they wish to, allowing the financial statements to show only desired results. This can lead to revenue or profit manipulation, can be used to hide financial problems in the company and can even encourage fraud. For example, changing the method of inventory valuation can bring more income into the current year 's profit and loss statement, making the company appear more profitable than it really is.
While IFRS requires that changes to the application of the rules must be justifiable, it is often possible for companies to "invent" reasons for making the changes. Stricter rules would ensure that all companies are valuing their statements the same way.
A small company would be impacted by a country 's adoption
References: Diaconu. Paul, Impact of Globalization on International Accounting Harmonization (January 18, 2007. 17 Nov, 2010. Available at SSRN: http://ssrn.com/abstract=958478 ”International Accounting Standards.” Encyclopedia of Business and Finance. Ed. Allison McClintic Marion. Gale Cengage, 2001. eNotes.com. 2006. 17 Nov, 2010 http://www.enotes.com/business-finance-encyclopedia/international-accounting-standards Weber, Cameron M. “Harmonization of International Accounting Standards. | Professional Services Accounting Professionals Center from AllBusiness.com.” Small Business Advice and Resources from AllBusiness.com. The National Public Accountnant, 1 Oct. 1992. Web. 18 Nov. 2010. http://www.allbusiness.com/accounting/methods-standards/339832-1.html Article from articlesbase.com Top 10 Accounting Software Vendors Revealed Get the industry 's most comprehensive Account Software Vendor Guide that covers the Top 10 Accoutning Vendors in the market today. This guide will help you identify the best Accounting Software solution that is the best fit for your company 's Accounting Softw