Advantages and Cost of Adoption in Australia of International Financial Reporting Standards (Ifrss) Essay Example
The issue of adoption of international financial reporting standards (IFRSS) in Australia has been controversial issue since the first time Australian Financial Reporting council (FRC) announced the policy in 2002. Many believe that IFRSS adoption will lead to great advantages such as enhance financial report comparability, improve quality of financial reporting, attract more foreign investor, and other significant advantages. However, some also believe that the adoption merely result in disadvantages and cost for Australian business, accounting profession and even Australian government.
Before deciding to fully adopt IFRSS, in 1996, the AASB issued Policy Statement 6 International Harmonization Policy with objective to ‘pursue the development of an internationally accepted set of accounting standards which can be adapted in Australia’. There were several considerations why government decided to do so:
1. ‘The existing arrangements for accounting standard setting are confusing, inefficient and not conductive to stakeholder participation
2. There is duplication between the AASB and PSASB
3. Australian Accounting Standards are not understood in, and are out of step with, the major capital markets in the United States (US), United Kingdom (UK), and Europe, resulting in higher costs of capital for Australian Business
4. The standards setting process is perceived to be dominated by the accounting profession and there is no real accountability to its users
5. Accounting standards do not reflect modern business practice, being too prescriptive and overly technical that imposing excessive costs on business
6. The process involved in standard setting have failed to attract broad input and the necessary level of financial support, with the result that accounting standards are not meeting the demands of constituents’ (CLERP 1997, pp.11-12, cited from Pickeet.al, 2006).
Despite those reasons, IFRSS adoption is promoted because several claimed benefits potentially
Before deciding to fully adopt IFRSS, in 1996, the AASB issued Policy Statement 6 International Harmonization Policy with objective to ‘pursue the development of an internationally accepted set of accounting standards which can be adapted in Australia’. There were several considerations why government decided to do so:
1. ‘The existing arrangements for accounting standard setting are confusing, inefficient and not conductive to stakeholder participation
2. There is duplication between the AASB and PSASB
3. Australian Accounting Standards are not understood in, and are out of step with, the major capital markets in the United States (US), United Kingdom (UK), and Europe, resulting in higher costs of capital for Australian Business
4. The standards setting process is perceived to be dominated by the accounting profession and there is no real accountability to its users
5. Accounting standards do not reflect modern business practice, being too prescriptive and overly technical that imposing excessive costs on business
6. The process involved in standard setting have failed to attract broad input and the necessary level of financial support, with the result that accounting standards are not meeting the demands of constituents’ (CLERP 1997, pp.11-12, cited from Pickeet.al, 2006).
Despite those reasons, IFRSS adoption is promoted because several claimed benefits potentially