What Are The Pros And Cons Of International Financial Reporting Standards

Overview

Accounting gives companies, investors, regulators and others with a standardized way to explain the financial performance of an entity. Accounting standards present preparers of financial statements with a set of rules that they have to follow when preparing an entity’s accounts, making sure this standardization is across the market (Robert 2008). Many Companies are required to publish their financial statements in accordance with the relevant accounting standards. To simply International Financial Reporting Standards (IFRS) is one set of accounting standards, which have been established and maintained by the IASB with the purpose of those standards being efficient of being useful consistently. These two bodies work together to come

IFRS requires entities to present comparative information in respect of the prior period for all amounts reported in the current period 's financial statements. In addition comparative information will also be provided for narrative and descriptive information if it is relevant to understanding the current period 's financial statements (Ec.europa.eu). There are pros and cons about the prudence in accounting standards, one thing is certain that financial information should be authentic and trustworthy. One thing, which is certain that there are many examples of prudence in existing IFRS and that these examples are widely accepted treatments. We can look at the following examples you should always discuss when the new framework draft is being given a shape. The discussion and definition should be reconsidered as arguably the principal role for prudence in standard setting lies in robust recognition criteria for assets and liabilities, where its application is transparent (Martin). Also another factor to consider is the retention of historical cost for many items will tell a proper degree of prudence to recognition of profit and asset values. These accounting Standards provide guidance but their application often involves a degree of judgment, “which allows for a range of outcomes largely because of uncertainty. In exercising that judgment management should err on the side of caution and prudence”(Martin). IASB is the body, which developed International Financial Reporting Standards and promoting the use and application of these standards. Some of the problems, which are faced by firms, are although IFRS is the standard way of doing reports. Some firms have there own way-doing things it differs from nation to nation many countries have there own