With the rapid development of financial systems, the convergence of accounting standards becomes increasingly common in the world. It means that countries are more likely to adopt international standards instead of national standards in order to establish the same high-quality criterion to help companies worldwide use it for both domestic and cross-border accounting statements (Tarca, 2004). For this reason, International Financial Reporting Standards (IFRS) are described as a widespread global language for business affairs so that company accounts are comprehensible and comparable across international boundaries, and also provide available information to investors and shareholders to make decisions. Moreover, profiles are completed for 130 …show more content…
Furthermore, Financial reports record the relevant economic activities of businesses, help various stakeholders to understand the performance of the firm and the resources of management stewardship. Having replaced International Accounting Standards (IAS), which were older legislation from 1973 to 2000, IFRS was issued by International Accounting Standards Board (IASB) on 1st April 2001 for the sake of making notable progress in developing comprehensive sets of accounting standards and international comparisons as easy as possible (U.S. Securities and Exchange Commission, 2012). Currently, IFRS has been publicly supported and confirmed by many international organizations, for instance, the G20, World Bank, IMF, but opponents criticize IFRS for being more principles-based than Generally Accepted Accounting Principles (GAAP). GAAP refers to the standard framework of guidelines for financial statements in the U.S., but the latter was associated with more rules-based than IFRS (Ball, 2009). Nevertheless, Brown (2011) holds firmly to the belief that rules-based criterion is perceived as being too detailed and intricate, making it increasingly difficult for companies to transfer private information, which could reflect precise …show more content…
Some might argue that IFRS is prone to cause low-quality financial statements because Benston (2006) point out that IFRS could lead to indulging earnings management, and then corporations can make lots of accruals adjustments when calculating net income. This is to say, lacking the supervision of earnings would increase the risk to intentionally influencing the process of financial reports to obtain private gain by personal interests in order to mislead stakeholders about the underlying performance of companies and organizations. However, based on the empirical studies, Jeanjean and Stolowy (2006) puts forward a strong case that they analysed the allocation of incomes in Australia and the UK if companies have managed capital to avoid losses after the implementation of IFRS. In addition, Data indicated that situations have remained stable in both two countries. Correspondingly, another study demonstrated that even though it was less controlled, there was no distinction for firms in Ireland and Northern Europe (Aussenegg et al., 2008). Furthermore, Tendeloo and Vanstraelen (2005) claimed that although adopters (German) of IFRS cannot be associated with lower earnings management, there is still marked reduction of manipulating incomes by means of being audited by accountants. Overall, these findings showed that switching to IFRS was not an important inducement of causing the
Switching to IFRS will help not just companies but also investors and public globally to compare financial statements. If every country has different financial standards, if would be problematic to compare how each company stands because they are not the same.
According to the FASB Accounting Standards Codification, goodwill is “An asset representing the future economic benefits arising from other assets acquired in a business combination or an acquisition by a not for profit entity...” (glossary). Goodwill is measured by the premium price we pay for a company; we calculate premium price by subtracting the amount we paid by the estimated price (Fair value) of the company and if we paid more goodwill is created. Goodwill is an intangible asset so it has an indefinite life because it cannot lose value over a specific amount of time. We test for impairment to find out if goodwill has kept its value or if it has declined and we test for impairment on an annual basis. However, goodwill in FASB Accounting Standards
To help accounting professionals easily navigate through 50-plus years of unorganized US generally accepted accounting principles (GAAP) and standards the Trustees of the Financial Accounting Foundation approved the Financial Accounting Standards Board (FASB) Accounting Standards Codification (Codification.) By codifying authoritative US GAAP, FASB will provide users with real-time and accurate information in one location. Concurrently, FASB developed the FASB Codification Research System; a web-based system allowing registered users to electronically research accounting issues. Since 2009, the codification became the single source of nongovernmental authoritative GAAP.
We would love for these impacts to always have a positive impact; however the impact can affect a company in a negative manner. “ Researchers Holger Daske, Leuz Hail, Christian Leuz and Rodrigo Verdi examined 3,100 firms in 26 countries mandated to adopt IFRS in “Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences”. The study examines the economic effects of IFRS, both early and mandated adoption” (Bolt-Lee). They were able to conclude that a company’s adoption of IFRS creates strong economic benefits in countries with rigid regulation over financial reporting. The article also explains that these benefits include an increase in the stock’s market value, an increase in market liquidity, and a lower cost of capital. Companies with major differences between GAAP and IFRS standards show the greatest benefit when supported by a strong regulatory
What is IFRS, and what is its significance in the world market? In 2001 the International Accounting Standards Board, or IASB, was created to develop a set of standards by which global financial statuses could be reported. According to financialstabilityboard.org, this set of standards, known as the International Financial Reporting Standards, or IFRS, falls under the jurisdiction of the IFRS Foundation, which is a non-profit, private and independently run entity that exists for the public interest, is based on four principle objectives. The first is to develop a single set of international financial reporting standards (IFRS). This set would be high in quality, readily understandable, easily enforceable, and acceptable world-wide. The second objective is to encourage the use of this set of standards in the international business world. Thirdly, the ISAB would like to monitor the needs of different sizes and types of businesses in different settings. The fourth objective is to promote the adoption of the IFRS by converging national accounting standards wit...
The Rosens charge that IFRS is a step backward and gives companies too much leeway when it comes to reporting. A company, for example, can record revenue if management believes there is a 50.001 per cent probability of collecting the cash. The situation makes it difficult for investors to truly gauge profitability-and it's made worse by the fact that companies use different estimates to calculate the value of their plants, and they're not always transparent
Management/Preparers of financial statements may have a number of factors that motivate them to manage earnings aggressively. The ultimate motive for earnings management, however, is to aesthetically enhance the performance of a company in the eyes of its stakeholders (Essays, UK,
The profession is slowly becoming as important as a doctor’s or a lawyer’s. Like so, where doctors and lawyers have certain standards they need to follow, accountants do as well. In the United States, the standards board is known as FASB, but around the rest of the world, the standards originate from IFRS. Globally there is a shift towards IFRS standards evident by the SEC permitting foreign businesses to use IFRS accounting principles when listing themselves on stock exchanges. This is putting pressure on FASB to converge with IFRS. Steven Mintz says this about IFRS
According to the conceptual framework, the potential users of financial statements are investors, creditors, suppliers, employees, customers, governments and agencies, and the general public (Financial Accounting Standards Board, 2006). The primary users are investors, creditors, and those who advise them. It goes on to define the criteria that make up each potential user, as well as, the limitations of financial reporting. The FASB explicitly states that financial reporting is “but one source of information needed by those who make investment, credit, and similar resource allocation decisions. Users also need to consider pertinent information from other sources, and be aware of the characteristics and limitations of the information in them” (Financial Accounting Standards Board, 2006). With this in mind, it is still particularly difficult to determine whom the financials should be catered towards and what level of prudence is necessary for quality judgment.
A current issue in financial accounting and reporting is the issue of Integrated Reporting which can be defined as “a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long term” (Roberts, 2014, p.28). With more countries thinking of making Integrated Reporting mandatory, it is important to come up with effective ways of transitioning from traditional reporting to Integrated Reporting. The transition is needed as there have been major changes in the way business is conducted such as how business creates value and the context in which business operates since the current business reporting model was designed (Sharman, 2012). This literature review will, therefore, define and discuss the concept of Integrated Reporting, and examine the effect of these changes on stakeholders. The paper will answer the research question: Should all organisations make a transition from traditional reporting to Integrated Reporting? This paper answers this research question as well as investigates future research and possible suggestions as to how this research may be carried out.
The globalization of business has resulted in the need for compatible accounting standards that can be used internationally for financial reporting. As a result, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) to unify the various financial reporting methods and create a single accounting standard which can be applied to any financial statement worldwide (Byatt). The global standardization of financial reporting will increase the readability and enhance comparability of globally traded companies’ financial statements, without the need of conversion or translation. There are a few main differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (U.S GAAP). The increasing recognition and acceptance of the International Financial Reporting Standards by accounting professionals in the United States, will affect the way in which the U.S will record financial statements in the future.
The International Accounting Standards Board, (IASB), began life as the International Accounting Standards Committee (IASC) in the 1973. The IASC was created in June 1973 as a result of an agreement by the accountancy bodies of Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland and the United States. These countries constituted the Board of IASC at that time.
I have applied the IFRS to audit half-year income statement and statement of finical position from domestic sub-company or oversea branches. This allows me to understand the difficultly of dealing with accounting report form different nations. For example, we have to negotiate each report from the U.S. with their reporter by phone. It would take incredibly long time to explain the difference in order to adjust the figures in the reports. During the stuff training, we have been taught that to be professional at everywhere and anytime. Moreover, I realise that the most important feature to be a professional accountancy is responsibility. This is because that a unit of misallocation will cost other team number a huge amount of work to correct it. The experience of taking notes of weekly conferences between senior managers and PWC partner has indicates that how does change in financial policy influence the accounting treatment. For instant, since vice-perminster Mr Le Ke Qiang who visited China Construction Bank at earlier May. He point out that the Rate of Non-Performing Loans could not exceed 7% in the “BIG Four” Chinese bank. This has led Chinese bank to relax its accounting standard of credit rating. It allows me to understand the relationship between government and financial
There are general rules and concepts that preside over the field of accounting. These general rules, known as basic accounting principles and guidelines, shape the groundwork on which more thorough, complex, and legalistic accounting rules are based. The Financial Accounting Standards Board (FASB) uses the basic accounting principles and guidelines as a foundation for their own comprehensive and complete set of accounting rules and standards.
The revenue/cost period-: Revenue and the cost period in accounting that the company get income from normal business activities. It’s referred to normal business income that the company got by selling their product and service.