Question

does the adoption of high-quality accounting standards such as U.S. GAAP and IFRS ensure high-quality financial reporting by companies on a global scale? why or why not?

Answer 1

The adoption of high quality accounting standards such as U.S GAAP and IFRS ensure high quality financial reporting by companies on a global scale. There are differences itself within U.S GAAP and IFRS but such differences can be looked aside for better fianncial reporting. The U.S GAAP is basically rule based methodology whereas IFRS is a principle based methodology. U.S GAAP consists of complex sets of guideliness to handle any contingency, whereas thrives on good reporting and then provides guideliness on specific contingencies. However both has common goal of ensuring high quality financial reporting for the users of financial statements. Adoption of such high quality standards ensures better comparability of entities and provide more consistent financial statements . Further Company seeking admission in any world stock exchange accepts IFRS as financial reporting framework. Both IFRS AND U.S GAAP eliminates barriers to cross border trading in securities by ensuring financial statements are more transparent and reduce risk towards investors uncertainity.

The need for adoption with Global Accounting and Financial Reporting standards is due to the following reason :

1. To facilitate enterprise which decides to raise capital from markets other than the country in which it is located, in translation and restatement of Financial Statements.

2. To facilitate analyst and investors across the world, in comparing Financial Statements based on harmonized Accounting Standards, which will ensure- a) uniformity b) rationalization c) comparability d) transparency e) adaptability

3. To reduce operational challenges for accounting firms in translation and restatement of financial statements and focus their value and expertize around a unified set of standards.

4. To create a challenging oppurtunity for standard setters & stakeholders to improve Financial reporting model.

5. To enable investors compare their investments on a global basis and lower their risk of error and judgement.