The adoption of IFRS Introduction The article ‘Do accounting standards matter?’ investigates if the adoption of one reporting standard across a multitude of countries has had an effect on the quality earnings management (Jeanjean & Stolowy, 2008). The investigation has been conducted by looking into firms that have adopted IFRS at the transition date and were not early adopters. Concentrating on three countries that changed due to the mandatory enforcement, rather than seeing the value in the adoption stops the investigation from being bias, as they are neutral about the change. By analysing the distributions of earnings management, to see if the pervasiveness has improved, the effect the standards can be proved (Jeanjean & Stolowy, 2008). …show more content…
When looking at local institutions adopting IFRS, there is significant importance in them understanding the accounting standards so that their judgements are in align with what the standard is designed to do, give quality to the reports by allowing them to be comparable. As seen in this article management incentives can influence the judgement decisions, so each local firm having a deep understanding of how to correctly implement IFRS is important because if IFRS is going to be successful in one country all the firms that make up that economy need to be interpreting the accounting standards in the same way. If IFRS is not implemented correctly the quality of the financial statements hold little value. If when implementing IFRS local institutions are aware of the importance of understanding IFRS then worldwide the financial information reported will mean more to investors and other users of the financial
Switching to IFRS will help not just companies but also investors and public globally to compare financial statements. If every country has different financial standards, if would be problematic to compare how each company stands because they are not the same.
Now more than ever it is important to know what IFRS is and what AICPA and IMA are, especially pertaining to their ethical standards. IFRS or the International Accounting Standards Board is a group of highly experienced professionals in the accounting field. They deal with the setting of standards, as well as preparing, auditing or using financial reports, and educating future accountants. The AICPA or the American Institute Of Certified Public Accountants is a non-profit organization of American Certified Public Accountants (CPA) who create
We would love for these impacts to always have a positive impact; however the impact can affect a company in a negative manner. “ Researchers Holger Daske, Leuz Hail, Christian Leuz and Rodrigo Verdi examined 3,100 firms in 26 countries mandated to adopt IFRS in “Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences”. The study examines the economic effects of IFRS, both early and mandated adoption” (Bolt-Lee). They were able to conclude that a company’s adoption of IFRS creates strong economic benefits in countries with rigid regulation over financial reporting. The article also explains that these benefits include an increase in the stock’s market value, an increase in market liquidity, and a lower cost of capital. Companies with major differences between GAAP and IFRS standards show the greatest benefit when supported by a strong regulatory
In the world of international finance there are two major accounting systems; GAAP, which stands for Generally Accepted Accounting Principles, and IFRS, which stands for International Financial Reporting Standards. The United States prefers GAAP while the European market, as well as many other countries, prefers IFRS. By 2015 the Securities Exchange Commission is anticipating a total transfer to IFRS in the United States. Though the differences between GAAP and IFRS are few, they could affect accuracy of financial reporting throughout the world. It is important to understand the differences and similarities between both GAAP and IFRS if one is to globalize ones market (Logue).
IFRS been used as a trail to make consistent accounting to the European Union but the value of IFRS quickly made the concept important around the world. However, it has been discussed that IFRS can really make a huge difference in financial world because that time IAS (International accounting standards) is been used for financial things and after a year is been replaced by IFRS.
So it appears that there would be some advantages for many aspects, such as accounting quality, when applying IFRS into various countries. Because IFRS would be able to exclude different options of accounting from national accounting standards which could reduce the divergence of management.[ Ahmed, A. S., Neel, M., & Wang, D. (2013). Does mandatory adoption of IFRS improve accounting quality? Preliminary evidence. Contemporary Accounting Research, 30(4), 1344-1372.](Ahmed, Neel & Wang, 2013) This change is likely to be more advantageous for more users, preparers and auditors to make their economic decisions. (Ramanna & Sletten, 2009)[ Ramanna, K., & Sletten, E. (2009). Why do countries adopt international financial reporting standards?. Harvard Business School Accounting & Management Unit Working Paper, (09-102).] Therefore, these expectations of changes would be beneficial for their local economic
Many corporations weather US or Global; big or small, public or private, have adopted different accounting practices which have consequences to business owners, investors stockholders, managers and corporations. Over recent years, many countries are gearing towards and trying to converge the two practices between International Financial Reporting Standards as one standard to allow simplified financial reporting and eliminating the need for conversion. The International Accounting Standards Boards (IASB) is trying to bridge the gap between these two accounting standards into one
Instead of setting guidelines for industry-specific reporting, IFRS offers standard guidance for the preparation of financial statements. By improving the international comparability and quality of financial data, these standards bring transparency in financial reporting and enable investors and other users of financial statements to make an informed economic decision. IFRS promotes comparability and harmonization. It is essential for the accounting practices in various nations to be coordinated particularly with regards to the multinational organizations that put resources in various
Judgement is a notion of relevance and reliability in developing and applying accounting policies. It is a requirement of management that they exercise a high degree of professional judgement when selecting appropriate accounting policies in the preparation of financial statements that is relevant to decision-making and assessment needs of users. Management should also consider the applicability of IFRS and AASB in dealing with similar and related issues and then the definitions, recognition criteria in the Conceptual Framework when there is no IFRS standard or interpretation in certain circumstances that are specifically applicable. Management may also consider the most current pronouncements of other standard-setting bodies to the extent that do not conflict with IFRS and AASB in developing accounting standards and accepted industry practices by using a similar conceptual framework.
The globalization of business has resulted in the need for compatible accounting standards that can be used internationally for financial reporting. As a result, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) to unify the various financial reporting methods and create a single accounting standard which can be applied to any financial statement worldwide (Byatt). The global standardization of financial reporting will increase the readability and enhance comparability of globally traded companies’ financial statements, without the need of conversion or translation. There are a few main differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (U.S GAAP). The increasing recognition and acceptance of the International Financial Reporting Standards by accounting professionals in the United States, will affect the way in which the U.S will record financial statements in the future.
The International Accounting Standards Board, (IASB), began life as the International Accounting Standards Committee (IASC) in the 1973. The IASC was created in June 1973 as a result of an agreement by the accountancy bodies of Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland and the United States. These countries constituted the Board of IASC at that time.
The Corporate Law Economic Reform Program No 9 discussion paper, recommended that Australia adopt the International Financial Reporting Standards (IFRS) which commenced 1st January 2005. A key driver for this recommendation was realization that Australia was part of an increasingly global network. It was suggested that adoption of the IFRS would lead to “high quality, internationally accepted accounting standards which will facilitate cross border comparisons by investors”, (CLERP No.9 2003). A benefit of improved comparability of accounting information would be enhanced bilateral capital flows at a lower cost to Australian firms. This prompted much debate and expressed concerns in Australia with the IFRS introduction. Many of the concerns related to “a potential loss of autonomy and legitimacy in standard setting”, (Jones & Wolnizer 2003). They also suggest that “the perception that IFRS are of lower quality than local Australian standards”.
I have applied the IFRS to audit half-year income statement and statement of finical position from domestic sub-company or oversea branches. This allows me to understand the difficultly of dealing with accounting report form different nations. For example, we have to negotiate each report from the U.S. with their reporter by phone. It would take incredibly long time to explain the difference in order to adjust the figures in the reports. During the stuff training, we have been taught that to be professional at everywhere and anytime. Moreover, I realise that the most important feature to be a professional accountancy is responsibility. This is because that a unit of misallocation will cost other team number a huge amount of work to correct it. The experience of taking notes of weekly conferences between senior managers and PWC partner has indicates that how does change in financial policy influence the accounting treatment. For instant, since vice-perminster Mr Le Ke Qiang who visited China Construction Bank at earlier May. He point out that the Rate of Non-Performing Loans could not exceed 7% in the “BIG Four” Chinese bank. This has led Chinese bank to relax its accounting standard of credit rating. It allows me to understand the relationship between government and financial
International Financial Reporting Standards (IFRSs) is a set of accounting standards developed by an independent, non-profit making organization popularly known as International Accounting Standard Board (IASB) which was created under the laws of state of Delaware, United States of America, on 8 March, 2001 (IFRS foundation) (IFRS.org, 2017) The objective of the IFRS is to present a unique and comparable accounting framework on how to prepare and disclose their financial statements globally. (Cotter, D., 2012) The most important change that occurred in the history of accounting was the adoption of International Financial reporting standards all around the world.
Auditing standards are currently seen as incredibly important to the Auditing profession and the Financial Industry as a whole. However, these standards were not always in place. Auditing was previously self-regulated and lacked guidance. Due to the many accounting scandals, stock crash, and securities market reforms that occurred, auditing was reformed, providing stronger requirements and placing more responsibility on those in charge.