Question

Financial Reporting Case

IFRS1-5 The following comments were made at an Annual Conference of the Financial Executives Institute (FEI).

There is an irreversible movement toward the harmonization of financial reporting throughout the world. The international capital markets require an end to:

1.The confusion caused by international companies announcing different results depending on the set of accounting standards applied.

2.Companies in some countries obtaining unfair commercial advantages from the use of particular national accounting standards.

3.The complications in negotiating commercial arrangements for international joint ventures caused by different accounting requirements.

4.The inefficiency of international companies having to understand and use a myriad of different accounting standards depending on the countries in which they operate and the countries in which they raise capital and debt. Executive talent is wasted on keeping up to date with numerous sets of accounting standards and the never-ending changes to them.

5.The inefficiency of investment managers, bankers, and financial analysts as they seek to compare financial reporting drawn up in accordance with different sets of accounting standards.

Instructions

(a)What is the International Accounting Standards Board?

(b)What stakeholders might benefit from the use of International Accounting Standards?

(c)What do you believe are some of the major obstacles to convergence?

Answer 1

Ans no a)

It is an association that creates worldwide benchmarks for bookkeepers clarifying how they should record and demonstrate organizations' money related data. They develop and approves the IFRSS(international financial reporting standards). The IASB is organized in committees intended to break down past gauges and declarations and draft new ones.

The IASB has 14 individuals, two of them dealing part time. The Board incorporates current and past practitioners, academics each sharing distinctive perspectives regarding each matter examined. The present bookkeeping guide exists in the IASB's Framework, the 34 International Financial Reporting Standards and the Interpretations. IASB is responsible for all technical matters related to IFRS foundation.

Ans no b)

Benefits from International Accounting Standards:

comparability :Organizations utilizing comparative measures to plan budget reports can all the more precisely contrast and one another. This is extremely helpful when looking at organizations that are situated in various nations, as they may some way or another have diverse procedures and principles in setting up these records

investors benefit: Universal models for accounting frameworks and the format of fiscal summaries rearranges global investment decisions . Investors can look at the fiscal summaries of organizations following International Accounting Standards Board measures, or other universal rules, paying little respect to the organization's country of origin. Without norms, making comparisons turns out to be less dependable, as the data displayed in fiscal summaries is determined utilizing distinctive methods.

ease of expansion : Organizations progressively look for strategic accomplices, clients or providers in outside nations. Worldwide accounting norms give organizations a typical monetary dialect and comprehension, making it less demanding for them to work together. Universal models additionally make a totally new industry, international accounting consultation, making new open doors for business visionaries in any nation.

The business can raise capital from remote markets at lower cost in the event that it can make trust in the psyches of outside investors that their fiscal summaries comply globally.

Ans no c)

manipulations: As organizations can just utilize the techniques that they wish, this would prompt financial statements indicate just desired outcomes, which can prompt benefit control. While this new arrangement of norms expects changes to how the tenets ought to be applied to be legitimate, usually workable for organizations to think of explanations behind rolling out such improvements.

cost:Regardless of whether huge or little, all organizations would feel the effect if a nation adopts IFRS. In any case, little organizations would not have adequate assets to execute the progressions that accompany it, also that they would need to prepare staff or contract bookkeepers or specialists for help

Not accepted everywhere: Honestly, the US has not yet embraced the IFRS, so as different nations that keep holding out also. This implies accounting by outside organizations working in these nations are confronting troubles since they need to get ready budget reports utilizing such a lot of guidelines and another arrangement of rules that is commonly acknowledged in these nations