The Importance And Effects Of IFRS

The U.S is moving toward IFRS (Forgeas, 2008). In the near future, all US company may need to report financial statements under IFRS. This makes the adaptation of IFRS unavoidable. Recently, some large multinational

UK’s IFRSs are designed to make it easier to compare the performance of organizations in different countries, rather than each country maintaining its own GAAP, which makes such comparisons difficult. All listed EU companies have been required to use IFRSs since 2005. The adoption of IFRSs by the private sector is expected to have various benefits for both companies and investors; including (1) UK’s IFRSs will remove the need for companies with foreign subsidiaries to translate the accounts for consolidation with the parent company accounts. Also (2) it will be easier for investors to make informed decisions about the performance of companies in different countries because of the increased transparency and a better understanding of financial statements.

Pologeorgis (2012) stated that the diversity of accounting principle has an essential impact on the stock markets, corporate management, and financial reporting. He pointed that when people seeking for international capitals, varies of dissimilar accounting principles create discrepancies in their financial reporting. If people cannot understand the differences between IFRS and GAAP, they may have the chance to make the wrong decisions and loss money in the capital markets. Pologeorgis (2012) also mentioned that international investors have to relearn the new principal in order to be more familiar with the international standards. Based on above, there is a keen motivation for people to understand the differences and similarities of GAAP and IFRS. This research will show business people the main similarities and differences of GAAP and IFRS.

As the responsibilities of the global harmonization of accounting standards IFRS and GAAP transfer to IASB, FASB’s influence is waning. Advantages of the convergence include high quality financial reporting, which lowers cost of capital for investors and the cost of borrowing for companies. However, there are disadvantages to be noted, such as the costs of introducing IFRS to current and potential accountants and the risk of reducing the uniformity of financial reports due to the lax rulings of IFRS, which promotes earnings management amongst companies. Although arguments regarding the convergence remain prevalent, the completion of IFRS and GAAP is inevitable. Come year 2015, accountants, investors, and companies alike will discover whether or not the pros outweighed the cons; or vice versa.

The SEC has several aspects to consider when it comes to the adoption of IFRS in the United States. First, the SEC should consider the overall costs impact this will have on businesses. It is likely that it would cost billions of dollars in new reporting expenses for U.S corporations to implement IFRS. It would also require accounting firms to vastly change their education requirements. Second, the SEC’s main job is to protect investors from fraud on public exchanges. The commission must determine whether IFRS does a better job of protecting investors from unlawful activity.

The purpose of this paper is to describe what accounting convergence means and assess the likelihood of the convergence being completed and implemented in the next five (5) years. IFRS is the principle based set of standards that establish standards and dictate specific treatments. IFRS has become a global standard for companies when preparing financial statements. IFRS consist of multiple reports stated on the Wikipedia website. The two reports that will be discussed in the paper are IFRS and GAAP. GAAP is an Accounting Standard that provides guidance for financial

With the growth of international business there is a need to standardize financial statements globally. Presently there are “approximately 120 foreign private issuers currently that report to the Commission using IFRS financial statements.” By standardizing accounting practices investors will be able to make informed decisions based on comparability and accuracy of financial statements. The SEC released this statement in 2008, “We believe that IFRS has the potential to best provide the common platform on which companies can report and investors can compare financial information.” The SEC has created a “Roadmap” or plan to convert US GAAP over to IFRS. According to The Committee of

Despite those enormous advantages, it has been argued that IFRSS adoption lead to significant costs. The main argument is that IFRSs do not consider local needs and priorities as every country has their own ‘business environment, legal systems, cultures, language and political environment’ (Henderson and Peirson, 2000 cited from Malthus, S., 2004). However, to overcome this problem, IASB can accommodate flexible reporting standards that enable companies to choose alternatives that are more suitable for their external condition. It is opinion of some opponents of IFRS adoption that IAS is ‘insufficiently detailed’ (Uddin,M.S., 2005, p.4) that require accountants’ and auditor’ professional judgment. However, overly detail might be contra productive and not flexible in anticipating every changes and differences.

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International Financial Reporting Standards (IFRS) are an international set of accounting standards. Early in the 21st century, the Australian Accounting Standards board, with guidance from the Financial Reporting Council (FRC), decided to implement IFRS’s throughout Australia. This decision was made so that Australia could participate and contribute to the development of a distinct set of accounting standards that could be used all around the world.

With complete notion and awareness of how each country has their set of rules, “the goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements” (Rouse, 2011). This view is meant to provide general guidelines, as well as international comparisons through conventional and edifying means. To bring broader and vivid objectives, IFRS replaced IAS, the older standards, in order to bring a more comprehensive and simplified accounting procedures.

This paper seeks to analyze the GAAP and the IFRS, their mandate and functions. Further, it shall compare the differences and similarities of the two standards which have such great implications to the functions of accountants, attorneys, corporate directors and

We now want to look into the International Accounting Standards Board and framework for the preparation and presentation of financial statements. The conceptual frameworks are split into five categories and are in the following order: the objective of financial statements; underlying assumptions; the qualitative characteristics that determine the usefulness of information in financial statements; the definition, recognition, and measurement of the elements from which financial statements are constructed; and the concepts of capital and capital maintenance (Ankarath 11). The standards under IFRS are beginning to become much more popular across the world for several different reasons. The International Financial Reporting Standards are currently being used by at the very least 100 countries and “[was] expected that by 2011, more than 150 countries [would] have adopted them” (Ankarath 1). We happen to find this important because it seems that a lot of countries are starting to adopt IFRS to report their financial statements. One of the reasons why many countries made the switch over to IFRS is because “the decision of the U.S. SEC to allow foreign private issuers to list their securities on U.S.

Including Fiat,more and more huge cooperations are adopting IFRS accounting policies since 2000,not only because it makes more transparency in statements,but it tenses or looses the strict that enhance the efficiency and accuracy of accounting.

After a series of amendments and notifications, finally Ministry of Corporate Affairs (MCA) declared the adaptation of Indian Accounting Standards (IND-AS).The main purpose of adopting IND AS is to make Indian accounting practices global. But India did not adopt IFRS (International Financial Reporting System), instead of that India prepared its own Accounting Standards known as IND-AS which converges with IFRS. It means it is much similar to IFRS but with some modification in order to fulfill the requirements of Indian Laws. The basic purpose of this paper is to understand new IND-AS, difference with IFRS and what types of challenges India would face in adapting to IND-AS.