International Financial Reporting Standards

There are huge and widespread discussions in the fraternity of the accounting and financial management about the consequences and implications of the acceptance of the International Financial Reporting Standards issued by the IASB as new world order for the accounting practices across the world. IASB has been lobbying and trying to convince and bring all the nations on the discussion table to discuss and adapt to this new financial and accounting reporting practices across the world as a homogeneous practice to help investors to decide accurately. Critics across the world are criticizing this process of standardization of accounting practices. Instead they are demanding for harmonization of financial reporting across the world to take care of the special needs of the needy nations. So a lot of controversy is there on this issue. It is important that there is no suspicion about the benefits or possible losses from the adaptation to IFRS. Standardization and Harmonization of financial Reporting:
Standardization of financial reporting and accounting is the process of developing a set of accounting standards and framework that is rigid and mutually accepted to all the members who are party to this framework. The process of standardization results into developing a homogeneous financial reporting and accounting framework to be used across the world. It is said to a rigid as well as narrow approach towards accounting and financial reporting and there are many analysts who are opposed to standardization of the financial accounting framework as it may hamper the growth in some regions. The another way of making the financial reporting and accounting practices homogeneous is harmonization of the financial reporting and accounting practices. The aims of harmonization are achieved by increasing the compatibility and cohesiveness of the accounting methods and financial reporting by setting a framework that has its degree of variation. This approach is liberal one and tries to accommodate everyone’s views and interests in process of reaching to a framework for the accounting practices and financial reporting across the world. The process of harmonization is time-consuming and rigorous. The process of standardization has a clear goal that of making financial reporting homogeneous. So it does not compromise on anything that can derail the process. It is very strict and rigid approach. It is narrow because it does not give any concession based on case or circumstances.
Acceptance of IFRS
Keeping future and changing business scenario in international economy, almost 85 countries have adopted to the IFRS. These countries are of view that in coming days the process of globalization will intensify and the significance of geographical boundaries will diminish over the time. And there will be need for a standardized financial reporting system to conduct the business efficiently. It expected that transition to IFRS will facilitate greater access and integrate the world capital markets for business entities belonging to these countries so this transition will result into reducing the cost of capital and risk and will increase the profitability. The increased profitability of corporations and better opportunities for growth as well as clear and transparent financial indicators will result into increasing mergers, acquisitions, investments and disinvestments across the world. It is expected that by adapting to the IFRS businesses in these countries will end up increasing the competitiveness of their businesses and economy. As a result of increased economic activities in these countries, the economies of these countries will expand significantly.

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