Uniform accounting standards produce uniform financial reporting. Discuss and evaluate the above statement in the context of the International Financial Reporting Standards (IFRS)

Topics: Balance sheet, Generally Accepted Accounting Principles, Financial statements Pages: 3 (1066 words) Published: March 10, 2014

In order to answer this question one must first identify what the phrases “accounting standards” and “financial reporting” refer to. Accounting standards refer to the accounting methods used in an accounting system like the IFRS. Financial reporting refers to the representation of financial information, in order to be uniform the financial reporting must be based on a fixed set of rules, invole complete objectivity and no bias. The IFRS (International financial reporting standards) has indeed helped the uniformity of financial reporting. However, in some cases due to subjectivity involved, created by human judgment, the financial information reported may not be uniform. Furthermore the various methods permitted by the IFRS for the valuation of assets, inventory, and other components, create non-uniform financial reports.

Uniform accounting standards are vital for uniform financial reporting as they specify the accounting methods used to interpret business transactions, this in turn creates an agreement on how commercial transactions are to be accounted for thereby creating uniform financial reporting. For example, the IFRS states that assets are to be recorded at the lower of their historical cost or net realizable value on the statement of financial position as a result all assets are reported in a uniform way. There are many other cases that lead to uniform financial reporting, but the main point is the standard rules implemented by the IFRS lead to a uniform way of reporting certain financial information.

However there are some aspects of uniform accounting standards that can lead to non-uniform financial reporting. In the case of the IFRS there are some aspects involved that rely heavily on human judgment. This subjective element can lead to varying financial reporting. For example the calculation of fair value is a highly subjective process. Especially for intangible assets like pension costs and share based payments, in both cases their...

References: Valuation of inventory information
http://www.pwc.com/us/en/faculty-resource/assets/pwc-ifrs-inventory-winter-2013.pdf
pharaphrasement used- “specify the accounting methods used to interpret business transactions, this in turn creates an agreement on how commercial transactions” came from
http://www.academia.edu/2480000/International_Financial_Reporting_Standards_IFRS_pros_and_cons_for_investors
Information on calculation of fair value
http://www.anc.gouv.fr/sections/la_recherche_a_l_anc/1ers_etats_generaux/a_wilson_how_fair_is/downloadFile/file/A_WILSON_How_Fair_is_Fair_Value.pdf?nocache=1292609799.42
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