Question

Find a journal article online about the convergence of International Financial Reporting Standards (IFRS). Post a link to that article and provide a summary (approximately 250 words) and a reaction (approximately 150 words) to the article. The summary should describe the major points of the article, and the reaction should demonstrate your interpretation of the article and how you can apply that knowledge.

Answer 1

The article traces the history of the IFRS and the implementation progress till date. IFRS standards have been set by the International Accounting Standards Board which has set out the standards for companies listed in 120 countries approximately. Most countries in the globe have adopted to the IFRS or have converged with the standards. However in the US, the adoption has not happened on a full scale nor there is any concrete step towards IFRS converging. Private companies in the US are free to adopt IFRS and prepare their financial statements according to the standards.

Also, there are pros and cons of having a single set of standards that are put out in the article. The pros allow comparability of financial statements of various companies across the globe. It helps in uniformity and helps in international financial reporting. The negative side of IFRS is that not all economies behave the same way to adopt a single set of standard to be applicable at a universal level.

Another aspect which affects the rules set by the IASB is the funds that it receives from. It is a privately funded organization and the major funding that it receives from, the standards are more likely to be set favourably according to that country, Hence, the standards are not totally free from bias.

Tracing the journey of the IFRS standards in the US, the initial step was taken in the year 2002 with the Norwalk Agreement to align the FASB standards with IFRS. The SEC which governs the accounting standards application for publicly listed companies has ruled out that any foreign company adopting IFRS must also present a reconciliation with US GAAP. However, there is no concrete time frame till date as to when the standards will be implemented.

In the recent years the FASB and IFRS have converged the standard n revenue recognition, revenue from contracts with customers. It aims to address any differences between the two accounting standards and have a common ground of accounting.

Link: https://njcpa.org/stay-informed/topics/article/2017/08/09/convergence-of-global-accounting-standards

Reaction:

The debate of IFRS converging with the local accounting standards has been going on for decades now with no conclusion that has been reached in any of the countries that the IASB board aims to implement. The main reason for this is that each country has its own economic conditions, rules and accounting practices which makes it difficult to implement a single standard model for global companies. Convergences help in attaining the goal to an extent however do not eliminate the differences in accounting practices. Also the IFRS rules seem a bit more complex with makes the implementation even tougher. Many countries have tried implementing the standards and failed to do so making them revert to the original standards or modify the new standards in line with the older ones.