The Importance Of International Financial Reporting Standards

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International Financial Reporting Standards are a set of high quality and complex accouting standards for the preparation of consolidated financial statements. International Accounting Standards Board set a mission to develop IFRS to promote transparency, accountability and economic efficiency in global capital markets (IFRS 2015).

By regulating the financial reporting globally, IFRS enhance financial reporting transparency. Adopting IFRS, euqities are required to disclose financial performance in a uniform format instead of being able to report only the good news and conceling the unpleasant infomation in their preferred way. For example, IFRS 8 require segment reporting and IFRS 3 asks for disclosure of discontinued operations and disposals
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It is proved by Henock and Urcan’s reseach (2010) that internaitonal investment to Australia has been significant increase, shown by figure that the proportion of corss-boarder acquisitions of listerd companies raised from 19.08% to 56.99% within 5 years after adoption of IFRS. Some more other researches also indicate IFRS’s benefits to Australia. Cotter et al. (2012) find that companies and industries produce economic forecast with higher acuuracy and make in-time economic adjustment or decision as IFRS improves the quality and comparability of financial reporting hence more accurate infomation can be accessed. And Goodwin, Ahmed and Heaney (2008) report that some requirement of IFRS such as capitalisation of intangible assets provide higher value relevance information for companies. Additionally, IFRS fills some gaps in Australian GAAP such as treatment to financial instrument and distinction between owner-occupied and investment property (Pawsey 2013). And management and anaysis for the financial reports of controlling entity can be more effective for multinational …show more content…
In the Extractive Industries Issues Paper, 78% of respondents preferred area-of-interest method and remaining 22 %argued for retention of choice between the successful efforts and full cost methods (Van Riper 1994). However, IFRS 6 retained the choice of two method. The disparity between the visible inputs and outputs of the standard setting process indicates the existence of a “black box”, in which IASB was covertly affected by the powerful extractive industries entities and coalitions in the standard setting process to protect their own current state and ensure their benefit (Cortese and Irvine 2010). Another obvious example would be revelent towards the US issue mentioned above, that is IASB’s efforts to cater to the US GAAP. In 2011, IASB updated the IFRS 13 Fair Value Measurement, which are largely identical with the US GAAP. It is calimed by IFRS that this move is to bring convergence and harmonisation of IFRS and US GAAP (IFRS 2015). While it considered by other less strong parties or coutires such as Australia to be a unfair decision that IFRS is caputured by the most powerful and strongest capital market in the world (Walker

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