Ifrs Pros And Cons
760 Words
4 Pages
Although the International Financial Standard Reporting (IFRS) of the International Accounting Standard Board has gained strong support worldwide, IFRS should not be adopted as a global reporting standard. First, the IFRS adoption does not cause rising of globalization, as it supporters may have claimed. Second, IFRS is not superior to other national general accepted accounting principles (GAAP), in particularly to the U.S. rules-based GAAP. Third, IFRS fails to deliver uniformity as a single-set globalized standard.
IFRS and Globalization There are insufficient empirical studies to show that the increasing in transnational transactions, or globalization, has been contributed by IFRS. Globalization has mainly driven by profitability, feasibility, …show more content…
However, it is important to note that the majority of those countries either have small to medium size economy and/or with limited firms, or do not readily have sufficient and reliable GAAP. For well-developed countries like the United States, the adoption of IFRS is unnecessary and needless. According to Doupnik and Perera (2012), “the need for such standards is not a universally accepted…it is unnecessary to force all companies worldwide to follow a common set of rules” (p. 93).
Besides, U.S. has large economy with many firms and its GAAP, a rules-based standard, constitutes a set of high-quality standards. Thus, adoption of IFRS has limited impact on its economy or international transactions pertaining to acquisitions and mergers (Hail, Leuz, & Wysocki, 2010). Empirical studies have shown that mergers and acquisitions occur predominantly because of strong regulatory enforcement of local GAAP, not on financial comparability (Hoffelder, 2012). Strong regulatory enforcement creates investment confidence for investors, as their interests are protected through regulatory …show more content…
With countries’ reservations for full adoption and convergence of IFRS standards – not to mention that each country adopts and develops its own version of IFRS -- fails to set IFRS as a-single-set globalized accounting. Moreover, because divergence such as institutional and regulatory differences continues to dictate financial reporting practices, guidelines, and frameworks, true comparability is
IFRS and Globalization There are insufficient empirical studies to show that the increasing in transnational transactions, or globalization, has been contributed by IFRS. Globalization has mainly driven by profitability, feasibility, …show more content…
However, it is important to note that the majority of those countries either have small to medium size economy and/or with limited firms, or do not readily have sufficient and reliable GAAP. For well-developed countries like the United States, the adoption of IFRS is unnecessary and needless. According to Doupnik and Perera (2012), “the need for such standards is not a universally accepted…it is unnecessary to force all companies worldwide to follow a common set of rules” (p. 93).
Besides, U.S. has large economy with many firms and its GAAP, a rules-based standard, constitutes a set of high-quality standards. Thus, adoption of IFRS has limited impact on its economy or international transactions pertaining to acquisitions and mergers (Hail, Leuz, & Wysocki, 2010). Empirical studies have shown that mergers and acquisitions occur predominantly because of strong regulatory enforcement of local GAAP, not on financial comparability (Hoffelder, 2012). Strong regulatory enforcement creates investment confidence for investors, as their interests are protected through regulatory …show more content…
With countries’ reservations for full adoption and convergence of IFRS standards – not to mention that each country adopts and develops its own version of IFRS -- fails to set IFRS as a-single-set globalized accounting. Moreover, because divergence such as institutional and regulatory differences continues to dictate financial reporting practices, guidelines, and frameworks, true comparability is