The Pros And Cons Of IFRS

1655 Words 7 Pages
In order to approach this topic for discussion, we should first clarify the meaning of key terms introduced in the thesis and examples of the levels at which they exist. Financial reporting standards are defined most cleanly as a set of guidelines and rules for conveying formal records of financial activities of an entity, capable of being applied consistently across the level at which they are designed. This can be locally, within a small or independent economy, or globally, as is the case with the IFRS and US GAAP, both of which have a wide range of users, both governments and firms pursuing the respective benefits which come from following a fixed set of accounting standards. Uniformity in financial reporting would involve every reporting …show more content…
Ramanna and Sletten (2009) explain the benefits of IFRS adoption as a means of as both economic and politically based, lowering the costs to reporting entities and users, making financial information more reliable and useful on an international scale, a summary reinforced by the IFRS’s own mission statement (IFRS 2016). Thus, there is evidence that financial reporting standards are believed to bring about uniform financial reporting, however it is the interference of other factors which we will see hinders this …show more content…
The setting Baxter was describing has become a reality; where the IFRS Foundation is victim to politicisation despite the process originally being intended to transcend politics in the pursuit of global reporting quality. Bengtsson (2011) describes the attempts by governments to gain some control back over the setting of standards since the 2008 global financial crisis, with both the EU and the G20 applying pressure to the IFRS to enact standards which would meet their demands or face losing endorsement. This political influence continues to persist as the IFRS must work to keep its users happy or be denounced, while nations, particularly the EU, continue to work closely with the IFRS while also being its second largest funder in 2012 (IFRS, 2012). Moreover, the IFRS faces political lobbying from firms as well as governments. A notable example of this phenomenon is that of Swiss company Novartis threatening to adopt the switch to US GAAP unless the IFRS began treating goodwill in the same way, fearing that it would put Novartis at a strategic disadvantage (Zeff, 2002). Though Gipper et al (2013) argue that political lobbying doesn’t have a negative impact on the setting of standards as it creates another medium through which discussion occurs, it’s impacts are clear and it serves to bog down the work of the IFRS in petty political discussions rather than working

Related Documents