Instructions
In this study, proper emphasis had been given to highlight the pros and cons for investors in association with International Financial Reporting Standards. The publishing date of this selected paper was September 2005 and it was purely based upon the PD Leake Lecture (Ball, 2006). By this paper, it was easy to understand that accounting had been driven by factors and these factors are economic and political ones. Advantages and disadvantages of International Financial Reporting Standards had been explained in the given study hat is quite conjectural by nature.
Several benefits of IFRS had been listed where it is treated to be extraordinary success as and when achieved for the purpose of developing a comprehensive set of high quality IFRS as it takes into account 100 countries who are showing interest in adopting IFRS and even rendering convergence in this standard and willing to become early adopters. On the contrary, IFRS has certain disadvantages where there are several problems linked with the present fascination of the IASB and FASB standards and even get aligned with the fair value accounting (Beneish, Miller & Yohn, 2015).
Emphasis upon certain implications of International accounting from their selected paper
In the year 2005, IFRS had started its commencement and become popular forefront as they had laid down certain agendas (Francis, Huang & Khurana, 2016). Most of the listed companies in Europe Union countries by that time were interested in drafting a report that can be purely based on consolidated financial statements and get is prepared in accordance to IFRS. Furthermore, it can be seen that business enterprises shows interest in engaging for the release of their first-full year IFRS that get aligned with the financial statements (Beneish, Miller & Yohn, 2015).
To explain in detail, it is all about the investors who shows interest in viewing the interim report as it is based on IFRS but still proper clarification about full gamut where year-end adjustments are made as International Financial Reporting Standards may be triggering in the future financial years. Therefore, there are advantages and disadvantages associated with IFRS from the point of view of investors and these became matter of conjecture (Muniraju & Ganesh, 2016).
To explain in detail, it can be seen that the markets and politics are becoming local by nature. In that way, different dimensions can be seen from the side where world seems local as compared to international markets and it is governed by the government that aligns with the economic factors (Thornton, 2015). There is interference by the Government who are required to take decision upon financial reporting activities and they act as a political influencer of mangers and the companies or may be bank for that case. Several legal systems like common versus code law are being taken into account that are already mentioned in the shareholder litigation rules.
Understanding the depth of financial markets and even the financial market structure is equally important as it help in bringing closeness in the relationship among the bank as well as client companies at the same time (Beneish, Miller & Yohn, 2015). Role of press plays an important part as they help at the time of conducting financial analysis and rating of agencies in the most appropriate way. However, it is require to take into account possible size of corporate sector and structure of corporate government like relative roles of labour and other concerned management activities in an effective way. Some of the other implication is to understand the extent of public versus public ownership of companies for future analysis purpose (Zeghal & Lahmar, 2016).
Answer
Some of the implication are already explained above that states that the standards help in providing reliable information to the investors (Beneish, Miller & Yohn, 2015). With the emergence of globalization or advent of globalization, it is noted that there are several irrational activities involved and this can be understood by understanding the concern of economy as a whole. Therefore, the listed implication in actual can be considered as primary driving forces that are together helping in understanding the majority of initial accounting practices as it can be either treated locally or internationally (DeFond et al., 2014).
Enlisting the contribution on how selected topic align with International accounting topic
On critical analysis, it can be seen that there are various factors associated with local political and economical where it is properly mentioned in the International Financial Reporting Standards (Naranjo, Saavedra & Verdi, 2017). Some of the political and economic factors on IFRS are mentioned and had been used after national standard adoption and it help at the time of undertaking decision-making activities. This particular concept was introduced when European Union decided to carving out the standard and came out with IAS 39 as it discusses about fair value accounting.
In this standard, it explain about the interest rates as it is used at the time of undergoing heading activities. To explain in detail, it is noted that European version of IFRS had been obtained as they have received immense pressure from France Government and because of this pressure, they had to engage in bringing volatility in several elements present in balance sheet (Beneish, Miller & Yohn, 2015).
Other levels can be seen where local political and economic factors are needed to be taken into consideration as it help in influencing adopting IFRS by the firms who have the interest towards choosing among different methods of accounting (Gassen, 2017). By looking at the factors, it can be seen that discretion can be exercised on a uniform basis within the countries. The effect of local politics can be seen that has little bit visibility and this can be understood by comparing it with the accounting standard IAS 39. By this, it is understood that initial effect of local political factors and other market factors will be treated under the boundaries that need to be inconsistent among the nations (Alon & Dwyer, 2016).
On analysis, it can be seen that there is certain drift identified while treating fair value accounting under International Financial Reporting Standards (Ali, Akbar & Ormrod, 2016). In this way, firms will be accelerating the maximum extent where they can implement IFRS as it depends upon the level of judgement as given by the managers as well as auditors. Some of the factors are linked in order to understand how far the local political and economic factors are influenced by the business firms. Most of the firms shows interest in adopting IFRS as it is linked with deep securities and currency markets participation at the same time (Beneish, Miller & Yohn, 2015).
Emphasis upon certain implications of International accounting from their selected paper
Once the implementation is done, most of the countries will be getting benefits from IFRS fair value accounting methods. But at the same time, the countries will even some issues relating to illiquidity and wide spread and subjectivity used for estimation the fair value accounting. While evaluating several countries, it can be seen that after adopting IFRS, these countries can get reliable information that are needed for implementing asset impairment standards and this will be handled by the auditors (Wieczynska, 2015).
Conclusion
Several discussions had been made above that shows that there is always a need for uniform reporting rules or standards that should be implemented in the world and this seems to be a matter of great virtual action. To that, internationally uniform accounting standard or rules can be taken into consideration and act as reap of faith where it give rise to get access of significant academic results. In this study, explanation was given about the workings of IFRS in fair value accounting as and when aligned with the reporting system in most of lesser developed nations. In that way, it can be seen that the incentives given to the preparers or in that case managers remains local as well as it is important to understand the differences in financial reporting quality.
This overall lead to sweeping under the rug of uniformity. However, highest standards should be adopted by Business Corporation so that they can manage the lowest quality regimes. By this, it will actually attract free use of brand name of IFRS. With the use of Uniform International Standards, it will be helpful in reducing the level of competition that took place in various systems. As far as long-run implication of global politics is concerned, it works well when IASB becomes a body that act as politicized, representative and bureaucratic.
On the contrary, some have disagreed where they shows no interest in adopting IFRS standards and not happy if there is uniformity present in accounting rules. They believe that widening of globalization of markets and politics refers to narrowing down the differences in these accounting standards and treatment done will be optional. Overall, it can be commented that adoption of IFRS can be considered as one of the economic and political experiment that is leap of faith and give rise to several pros and cons of IFRS from the point of view of the investors.
Reference List
Ball, R., (2006). International Financial Reporting Standards (IFRS): pros and cons for investors. Accounting and business research, 36(sup1), pp.5-27.
Beneish, M. D., Miller, B. P., & Yohn, T. L. (2015). Macroeconomic evidence on the impact of mandatory IFRS adoption on equity and debt markets. Journal of Accounting and Public Policy, 34(1), 1-27.
Francis, J. R., Huang, S. X., & Khurana, I. K. (2016). The Role of Similar Accounting Standards in Cross?Border Mergers and Acquisitions. Contemporary Accounting Research, 33(3), 1298-1330.
Thornton, D. (2015). Different Conceptual Accounting Frameworks for Public and Private Enterprises: An Analysis of Canada’s IFRS Transition and Suggestions for International Empirical Work.
DeFond, M. L., Hung, M., Li, S., & Li, Y. (2014). Does mandatory IFRS adoption affect crash risk?. The Accounting Review, 90(1), 265-299.
Naranjo, P., Saavedra, D., & Verdi, R. (2017). Financial reporting regulation and financing decisions.
Gassen, J. (2017). The effect of IFRS for SMEs on the financial reporting environment of private firms: an exploratory interview study. Accounting and Business Research, 47(5), 540-563.
Wieczynska, M. (2015). The “Big” Consequences of IFRS: How and When Does the Adoption of IFRS Benefit Global Accounting Firms?. The Accounting Review, 91(4), 1257-1283.
Ali, A., Akbar, S., & Ormrod, P. (2016, March). Impact of international financial reporting standards on the profit and equity of AIM listed companies in the UK. In Accounting Forum (Vol. 40, No. 1, pp. 45-62). Elsevier.
Alon, A., & Dwyer, P. D. (2016). SEC’s acceptance of IFRS-based financial reporting: An examination based in institutional theory. Accounting, Organizations and Society, 48, 1-16.
Zeghal, D., & Lahmar, Z. (2016). The Impact of IFRS Adoption on Accounting Conservatism in the European Union. International Journal of Accounting and Financial Reporting, 6(1), 127-160.
Muniraju, M., & Ganesh, S. R. (2016). A Study on the Impact of International Financial Reporting Standards Convergence on Indian Corporate Sector. Journal of Business and Management, 18(4), 34-41.
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