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

Topics: International Financial Reporting Standards, Financial statements, Finance Pages: 2 (793 words) Published: April 17, 2014
In the last decade, various countries around the globe have shifted towards a uniform accounting standards or the International Financial Reporting Standards (IFRS). The main motive behind this movement is to come up with a global language for accounting which will be comparable and understandable beyond the borders of a nation. As of today about 120 countries require IFRS for domestically listed companies, although only about 90 countries have fully conformed to IFRS . While some argue that it is necessary to have a system of accounting that is clear and transparent to global investors and companies, some others are skeptic about it being efficient. Furthermore, some feel that the costs of implementing IFRS can be too high and hence uniform accounting will not be worth the cost. Hence, critically analyzing IFRS and understanding its impact on accounting principles will help us to recognize the costs and benefits of this system. One of the main objectives of IFRS is to increase the efficiency and transparency in accounting. However, the main tension in the model rests due to the non- uniform nature of firms as well as nations. For instance, countries differ on myriad ways such as capital and labor markets, nature of government, involvement of government in the company and so forth. Similarly, firms differ from each other in various ways including size, growth, types of products, geographical location and technological advancement . Therefore, coming up with a detailed accounting system or a set of principles to fit all of these can be challenging. Thus, IFRS uses a principle based system, rather than a rule based system which will allow the companies to apply IFRS according to their situation and prepare their statements. However, this flexibility can itself be seen as a big down- side of this system. This will provide a way for companies to manipulate the statements which in turn can encourage fraud. Trancy Coenen comparing the fraud under the system of GAAP...
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