Question

the current status of IFRS worldwide and in the United States. discuss challenges as well as opportunities of IFRS adoption in the United States, from the perspectives of: preparers of financial statements

Answer 1

Standards, Interpretations and the Framework for the Preparation and Presentation of Financial Statements set and adopted by the International Accounting Standards Board. IFRS has replaced the older term international accounting standard. Many of the standards forming part of IFRS are known by the older name of International Accounting Standards (IAS)

1. Benefits of Convergence with IFRS

• It is sensible to make a careful preliminary assessment and a cost/benefit analysis of whether or not under the particular circumstances, an adoption of IFRS would be desirable and also examine different scenarios concerning timing of adopting IFRS. The number of companies which elect to adopt IFRS is growing and this is because IFRS reporting [4] offers a wide scope of benefits.

Examples of these benefits include the following:

• IFRS significantly improves the comparability of entities and provide more consistent financial information.
• IFRS are accepted as a financial reporting framework for companies seeking admission to almost all of the world’s stock exchanges (including US).
• The enhanced comparability of the companies’ financial information and the improved quality of communication to their stockholders, decrease investor uncertainty, reduce risk, increases market efficiency and eventually minimizes the cost of capital.
• IFRS eliminates barriers to cross border trading in securities, by ensuring that financial statements are more transparent.
• Management reporting for internal purposes under IFRS, can improve the quality and consistency of information that management needs in order to make effective, efficient and timely decisions for the business.
• IFRS adoption may be used as a chance to make some strategic improvements to the finance systems and processes as well as to reduce costs in the longer term.

1. It would create a single set of accounting standards around the world.
Instead of using multiple accounting standards based on the preference of each country where an organization does business, adopting the International Financial Reporting Standards would enable agencies from different segments of the globe to apply the same standards in every transaction.

• The advantage to find here is an increase in transparency, which would then allow for more accessible cross-border investments. It would decrease the cost of capital while providing higher liquidity during each transaction.

2. It would create an adjustment period filled with tumult.

When organizations begin to move from their current accounting standards mandated by the country of origin to the global accounting rules set by the International Financial Reporting Standards, then there is an increased risk of suffering from a costly delay or mistake during the transition period.

• Since every country maintains their own complex systems of regulations that govern financial reporting without direct involvement with the standards in use, there might still be a requirement to offer multiple reports as well.
• That means the only difference we see when adopting IFRS globally is a shift in the presentation of what the agencies provide.