Question

Rules-based accounting reduces judgment to be exercised by preparers and auditors; it also makes it easier for regulators to check compliance and can be a deference against litigation. It is also said to enhance comparability and consistency. On the other hand, it can lead to structuring the form of transactions to achieve a particular accounting result within the letter of the rules. It also puts pressure on the rule-makers who may have to respond whenever new developments arise. It will be interesting to see if all major markets make the change. What are most accountants thoughts on the potential adoption of IFRS?

Answer 1

Accountants thoughts on potential adoption of IFRS

Globalisation along with opening up the economy has facilitated MNCs to operate in many countries and accounts have to be prepared for not only the understanding of a specific country but also for the understanding of all the countries in which the business operates. A lot of international transactions take place on a daily basis and the number will surely increase over time.

In the past the accounts had to be maintained on the basis of country specific norms, but now since IFRS has addressed this challenge by facilitating internationally accepted set of accounting standards that bring uniformity, transparency and efficiency across the world.

Adopting IFRS surely comes with its cost and strives; the businesses reporting should at least change some of its practices. Investors and other parties using the information will have to understand how things have changed.

As far as accounting professionals are considered they have to learn a brand new procedure. This may prove to be complex since any change in accounts has to be a replacement of some age old practise. Learning a new concept and replacing it with an existing one comes with some costs and great effort. And for that matter not many institutions do provide training in this area.

But, as far as the business is concerned, the use of a single trusted accounting language lowers the cost of capital and reduces international reporting costs.