So, what actions are needed to develop an effective financial reporting infrastructure, such that the set of IAS in use, which if we presume is deemed high quality, can facilitate the consistent interpretation and application of the standards?
Businesses using similar standards to prepare financial statements can more accurately compare with each other. If financial statements were more comparable, owners would be able to complete more of these comparisons in house. A shock in one area may affect the others.
While this new set of standards requires changes to how the rules should be applied to be justifiable, it is often possible for businesses to come up with reasons for making such changes. Let me first focus on the oversight of the accountants who practice before the Commission.
Comparability The biggest advantage of a single set of global accounting standards is the enhancement in comparability between companies in different countries.
As such, we will have to carefully consider the significance and pervasiveness of areas where differences continue, as well as whether forms of disclosure other than a reconciliation would sufficiently inform investors.
While convergence can have a variety of different meanings, it has generally assumed that, ultimately, all standard setters should agree on a single, high-quality answer.
Lastly, most accounting professionals are trained in U. Thank you very much Dr. As financial information is primarily driven by accounting standards, the staff has had a keen interest in IAS and the developments related to those standards. They Foster Transparency One advantage of using accounting standards involves the ease of understanding the financial statements.
Institutional investors can increase their holdings if the companies adopt IFRS. His career includes public company auditing and work with the campus recruiting team for his alma mater.
While the final regulation has not yet been approved, significant progress appears to have been made. To the extent that these laws and regulations differ, small-business owners comparing domestic and international investment opportunities might have a false sense of security about the actual similarity between investment options.
Our proposal would include a system where involuntary fees would be imposed upon those who benefit from the financial statements audits, whose quality would be overseen by the PAB. Perhaps the most obvious: GAAP is made predominately by professionals within one country.
When financial reporting issues arise, the accountant may refer to the published accounting standard to determine how to record the event. Second, the PAB would be an organization that is dominated by members that are unaffiliated with the accounting profession.
However, these proposed changes have repercussions for small business as well. GAAP, as this example would cause some to believe, although in this case I understand the IASB is favorably disposed to adopting the principles on business combinations outlined previously. Developments in International Financial Reporting In the last 12 to 24 months, there has been a tremendous change in the financial reporting infrastructure within the European Union, as evidenced by the many interesting and important developments that have occurred.
IFRS becomes the global standard for preparation of financial statements. While we recognize that some of the elements of the infrastructure may be at different stages of development and that decisions and progress on these infrastructure issues may be independent of the quality of International Accounting Standards, we believe these issues must be considered in the development of any proposals to modify the current reconciliation requirement.
Training of thousands of accountants and auditors who have not previously worked with IAS, keeping in mind the standards will be moving targets. First, short-term convergence is a two-way street, not a one-way street.
Disadvantages Moving to a single standard has plenty of advantages but also some disadvantages.3 International Financial Reporting Standards - Advantages & Disadvantages; And even though accounting standards would be standardized across countries, laws and other regulations would not.
Executive Summary This paper focuses on the consequences of globalization on accounting. The research paper analyses the effects of globalization on accounting from three perspectives, which include effects on the Generally Accepted Accounting Principles (GAAP), management accounting and threats and opportunities for accountants.
The Financial Accounting Standards Board, or FASB, creates accounting standards that outline the proper method for recording various transactions, such as installment sales or pension liability. These recognized accounting standards provide important advantages, but also carry some disadvantages.
Advantages And Disadvantages Of Accounting Standards Accounting Essay. Print Reference this. Accounting Standards, Advantages and Disadvantages: Having said that accounting standards are the provider of the rules, conditions and consistency, they may hold some pros and cons while they are being implemented and taken in any.
Speech by SEC Staff: Moving Toward the Globalization of Accounting Standards by Robert K. Herdman Chief Accountant, U.S. Securities & Exchange Commission. Home Pros and Cons 6 Advantages and Disadvantages of Adopting IFRS.
6 Advantages and Disadvantages of Adopting IFRS towards the International Financial Reporting Standards (IFRS), of which common accounting rules define what information must be disclosed in financial statements and how transactions must be reported.