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IFRS and its Increasing Acceptance

Over seven decades, the accounting standardization project, which was sparked by the implementation of US securities regulations in the 1930s, has progressively gathered speed. This study analyses the against the side. This study describes that accounting theory, practice, instruction, regulation, and even research are all dominated by written standards. This report highlights that accounting fraud and its effects continue to echo in the United States' courts, media government, and regulatory agencies (Bach, et al., 2021). This report is described how adopting a group or set of accounting standards impacted the country. It also focused on the negative aspects of IFRS (International financial reporting standards). The key elements of the reports are IFRS, Standard Accounting and accounting standardization project, and US securities regulations.

The GAAP accounting standards were settled primarily in the United States, whereas the IFRS accounting standards were formed in Europe. The IFRS (International Financial Reporting Standards) are becoming increasingly widely accepted. IFRS is expected to be permitted and required for domestic listed companies in 120 countries and reporting jurisdictions (Kaya, & Koch, 2015). Although nearly 90 nations have fully implemented the IFRS as promulgated, which includes the acknowledgment statement (Horton, J., and Serafeim, 2013). Most of the countries that follow the A shift in focus from rules to norms could aid corporate governance and accounting in regaining an efficient and sustainable equilibrium. Not only in rules and regulation, but also in other areas of our social lives such as neighborhood, family, alcohol and drug usage, employment, attire, table manners, sports, and a balance between the responsibilities of norms and rules is ideal. Accounting rules can be restricted and inflexible, which is one of their key drawbacks. Each business has its own set of circumstances and financial activities. Though, even if it is not the utmost approach to depict the financial event, the corporation must make these situations imitate the standard of accounting.

Accounting fraud and its effects continue to resonate in the United States' courts, government, media, and regulatory agencies. European commercial has not been immune to these issues. The Sarbanes-Oxley Act of 2002, enacted by the United States, overhauled the corporate auditing and accounting regime (Sunder, 2005). The new Act gave the (SEC) Commission of Securities and Exchange new powers, increased the requirements for internal control certification, and to oversee write auditing rules, Public Company Audits, monitor audit firms and the industry, it established the PCAOB (Public Company Accounting Oversight Board). The Act's ability to successfully address the issues it was intended to address is contingent on how the alleged reasons for auditing and accounting failures are connected to the concrete causes. The accounting standardization process continuously getting momentum and have a rapidly major negative impact on other county accounting standards (Sunder, 2005). Issues in the accounting standards include; recognition of financial events, difficulty in choosing alternatives, and restricted scope.

Many lawyers, investors, auditors, corporate executives, commercial bankers, and corporate directors, believe that they can evasion on their discrete roles in corporate governance, which is the direct cause of accounting and audit error. Such views were prevalent at the time. It has been exacerbated by the government's and regulatory authorities' incapacity to rein in the industry.  Individual failures to fulfill their responsibilities of care and commitment.

Issues in Accounting Standards

The IFRS (International Financial Reporting Standards) is a group of accounting rules for public organizations' financial statements that are intended to make them consistent, easily comparable and transparent across borders. Several limitations would be considered as the norms for the accounting standards it includes: It can increase the cost for the small business, it leads to concerns with standard manipulation, it needs global consistency in auditing and accounting enforcement. It can increase the number of workplaces in accountants. For example, the different versions of IFRS ascend because most countries are familiar with interruptions or changes when executing IFRS.  

Due to their necessity of preparing these intelligences outside of the US, large corporations would engross the cost of implementing the IFRS (International Financial Reporting Standards). Small firms that provide localize services and goods would bear the effect of this cost since they would compel it to regulate (Kang, 2020). Because Small Medium Enterprise have less resources, it would take them lengthier and more effort to train their staffs in this technique. The IFRS can even lead to misleading practices, such as changing technique of inventory value to increase revenue on the profit and loss statement. IFRS in any country still requires global acceptance to proceed under their circumstances.

Accounting standards (AS) ensure that plentiful companies financial accounts are comparable. Accounting standards (AS) keep financial statements realistic and enable more economic decisions based on consistent and accurate information because all organizations follow the same standards (Manes-Rossi, et al, 2018). The adoption of IFRS resulted in less creative accounting (lower amplitude of abnormal accruals), more prompt and less acknowledgment, and greater value significance of earnings as well as book values after controlling for company characteristics such as growth, size, opportunities, audit quality, and risk. For example, drawbacks of IFRS strive to eliminate the book reconciliation that must occur under the present system to have a consistent picture before making future decisions (Ibiamke, & Ateboh-Briggs, 2014). Creditors would no longer have to deal with this problem when evaluating or comparing the creditworthiness of international entities.

According to Ball 2006, Political and economic forces shape accounting. As a outcome of the greater global integration of politics and markets (due to lower information and communications operational costs), enlarged globalization of financial reporting values and procedures which is almost inevitable (Ball, 2006). However, for the foreseeable future, most market and political factors will remain local, so it's indeterminate how much authentic financial reporting practice should converge. Ball also analyses some settled theories and indication to build a valuation of the disadvantage and advantages of uniform accounting standard rules within the country. Ball has a point on the cons side of IFRS, He stated in his report that the problems with the IASB (and the FASB's) present preoccupation with fair value of accounting. A profounder worry is that there would certainly be significant differences in IFRS implementation between states, which is now a risk being obscured by a veneer of consistency. In this research, study Balls believe there are compelling economic and political grounds to believe that IFRS implementation will be uneven throughout the world, particularly in Europe. Whether there are worldwide standards or not, significant international variances in financial reporting practice and quality are unavoidable (Ball, 2006). At last, he comprises that Despite rising globalization, the majority of economic and political impacts on financial reporting are still local.

It includes the major disadvantage of IFRS as per the review on the accounting standardization process which includes: Lack of details, the perception that IFRS can be a less stringent standard, and have a significant cost of adoption. It may have no clear idea of operating the efficiency, not so beneficial for price fixation, there is no classification of accounts and expenses and have no control on cost (Mardini, et al 2019). It may relate to the high cost for the application by multinational companies across global. It comprises the changes in the internal system which make it less compatible with the new standard. It considers the major aspect that IFRS has implemented during the consideration and taking the accounting standardization process which rapidly has momentum in the past 7 decades.

Conclusion:

It is difficult to comply with the IFRS with another country this discussion comprises that even though IFRS statements have a denser structure and sometimes include unclear terminology and definitions, decision-making models have been developed in the area of lacking the accounting standard. It comprises the negative aspects of implementing IFRS while adopting the set of accounting standards all over the countries. It complies with all the several disadvantages which may impact the financial trade and accounting globally. Following that, the Basis for Results was amended to reflect changes to the Standard. At last, the discussion concludes that internasal or global accounting standards have a lack of details, high adoption costs, and less stringent standards which can harm another precise country. 

References

Bach, T., Jugl, M., Köhler, D., & Wegrich, K. (2021). Regulatory agencies, reputational threats, and communicative responses. Regulation & Governance.

Ball, R. (2006). International Financial Reporting Standards (IFRS): pros and cons for investors. Accounting and business research, 36(sup1), 5-27.

Horton, J., & Serafeim, I., (2013). Does mandatory IFRS adoption improve the information environment? Contemporary accounting research, 30(1), pp.388-423.

Ibiamke, N. A., & Ateboh-Briggs, P. B. (2014). Financial ratios effect of international financial reporting standards (IFRS) adoption. Journal of Business and Management Invention, 3(3), 50-59.

Kang, G. B. (2020). Determinants of International Financial Reporting Standards Accounting Policy Choices of European Union Listed Companies (Doctoral dissertation, Capella University).

Kaya, D., & Koch, M. (2015). Countries’ adoption of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs)–early empirical evidence. Accounting and Business Research, 45(1), 93-120.

Manes-Rossi, F., Tiron-Tudor, A., Nicolò, G., & Zanellato, G. (2018). Ensuring more sustainable reporting in Europe using non-financial disclosure—De facto and de jure evidence. Sustainability, 10(4), 1162.

Mardini, G. H., Wadi, R. S., & Mah’d, O. A. (2019). Empirical evidence of the suitability of IFRS in emerging markets. Accounting Research Journal.

Sunder, S. (2005). Minding our manners: Accounting as social norms. The British accounting review, 37(4), 367-387.

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My Assignment Help (2022) An Analysis Of IFRS, GAAP Accounting Standards, And Accounting Standardization Project: An Essay. [Online]. Available from: https://myassignmenthelp.com/free-samples/ec5601-international-accounting-standards-and-policy/public-company-audits-file-A1DC732.html
[Accessed 29 February 2024].

My Assignment Help. 'An Analysis Of IFRS, GAAP Accounting Standards, And Accounting Standardization Project: An Essay.' (My Assignment Help, 2022) <https://myassignmenthelp.com/free-samples/ec5601-international-accounting-standards-and-policy/public-company-audits-file-A1DC732.html> accessed 29 February 2024.

My Assignment Help. An Analysis Of IFRS, GAAP Accounting Standards, And Accounting Standardization Project: An Essay. [Internet]. My Assignment Help. 2022 [cited 29 February 2024]. Available from: https://myassignmenthelp.com/free-samples/ec5601-international-accounting-standards-and-policy/public-company-audits-file-A1DC732.html.

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