In the paper "Accounting Policies International Financial Reporting Standards Adoption and Effects", a brief look at the International Financial Reporting Standards (IFRS) was undertaken to provide some background information that will be useful in this analysis of its adoption in the UK and China…
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In 2002 the EU made it mandatory for all member states to use IFRS for listed companies beginning in 2005 (Jermakowicz and Gornik-Tomaszewski, 2006). The uniformity of accounting standards represented by IFRS was crafted to create an easier platform for investors (inside and outside of the EU) to analyze the financial statements of companies and draw comparisons (Jermakowicz and Gornik-Tomaszewski, 2006). It provides a common accounting framework for international investors along with the fact that the UK (London) is the second-largest financial center globally after Wall Street in the United States (Jermakowicz and Gornik-Tomaszewski, 2006; Engelen and Grote, 2009). The above stock exchange aspect and EU member state adoption represent the application of economic network theory that states additions to a network benefit the entity joining as well as the other members in the network and can drive change regarding policy (Lafour, 2005). There is also the net political value of IFRS that consists of the overall gain in creditability that the EU benefits from by harmonizing accounting practices in order to increase transparency within the trade bloc (Ramanna and Sletten, 2009). In terms of factors that helped to shape the IFRS in the UK, Horton et al (2008) advise that the adoption of IFRS has the potential in many cases to decrease information costs, increase liquidity, heighten efficiency and foster more balanced competition in markets. In terms of the adoption of IFRS in the UK, the following represents the exchanges affected (Deloitte, 2015):
London Stock Exchange – Regulated Market
London Stock Exchange
London International Financial Futures and Option Exchange
London Metal Exchange
ICAP Securities & Derivatives Exchange
ICE Futures Europe
NYSE Euronext London
In terms of companies that are not listed the UK permits them, with the exception of charities (that must use UK GAAP), to use either UK GAAP or IFRS (Deloitte, 2015). The above adoption of IFRS that applies to listed companies was done in order to comply with the EU directive on IFRS as well as to provide a common financial statement reporting system that is uniform among member states (PriceWaterhouseCoopers, 2005). The ability of companies that are not listed to use either UK GAAP or IRFS was done in order to minimize potential increased accounting costs for non-listed companies in terms of compliance (PriceWaterhouseCoopers, 2005). A look at factors that helped to shape the adoption of IFRS in China, its admission to the World Trade Organisation (WTO) was one integral part (Buthe and Mattli, 2011). This is done to create a sound and easily understood financial reporting system to help further the country’s economic development (Walter, 2008). In terms of China’s push to advance its footing in global markets, the Chinese Ministry of Finance, that oversees China’s accounting policies, sought to increase investor confidence in the financial information provided by companies (Walter, 2008). Regarding the effects of accounting policies and IFRS adoption in the UK, a study by Nobes and Kvaal (2010) found that despite the EU shift to IFRS, there is still the British UK GAAP version that was in place prior to the EU IFRS mandate which is in use by companies that are not listed.
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...Executive, 24(2), 6. Daske, H., & Gibhardt, G. (2006). InternationalFinancialReportingStandards and experts's perception of quality. Abacus, 3(4), 42. Derstine, R., & Bremser, W. (2010). The journey toward IFRS in the United States. The CPA Journal, 6, 8-9. Dulitz, L. (2009). Be ready to lead your company's transition to IFRS. Journal of Accountancy, 207(4), 46-49. Epstein, B. (2009). The economic effects of IFRS Adoption. The CPA Journal, 79(3), 26-31. Heffes, E. (2009). When will the U.S. adopt/converge with IFRS? Financial Executive, 25(6), 12. Jacob, R. A., & Madu, C. (2009)....
...on its local financial environment. Therefore developing an accountingstandard which suits individual country specific needs is a very challenging task. International Convergence: The difference between the national accountingstandards and InternationalFinancialReportingStandard is minimal and it lies mostly because of the differential treatment of specific transactions. Hence the issue of international convergence comes in which tries to state whether the gap between the national standard and international...
...of accounting guidelines. As a financial professional in a multinational corporation, it will be easier to analyze and compare the profitability of different global investments of the company. Firms will incur costs associated while adopting the internationalfinancialreportingstandards. Over the years, financial professionals such as accountants have been instructed using the GAAP (Generally Accepted Accounting Principles). A substantial sum of money will be used to train all the financial professionals (Walton 87). As a financial...
...?In the United s the prevailing accounting framework utilized by professionals in the field of accounting and finance is the U.S generally accepted accounting principles (GAAP). Despite its effectiveness in other parts of the world U.S. GAAP is not an accepted accounting framework. In the international community the fastest growing accounting framework that is being used in the business industry of different countries is the internationalfinancialreportingstandards (IFRS). The internationalfinancial...
...framework underlying its financialreportingstandards and interpretations, the Framework for the Preparation and Presentation of Financial Statements (the Framework). The Framework sets out the concepts that underlie the preparation and presentation of financial statements for external users
This Essay provides an adequate knowledge of InternationalAccountingStandard (IAS) and General Accepted Accounting Principle (GAAP) and their comparison. Mainly we only emphasize on the 5 IAS and compare their similarities and differences with the GAAP. It includes the...
...IFRS What are IFRS What body issues IFRS Why is conversion to IFRS important for U.S. companies What are some issues involved in the conversion from GAAP to IFRS
InternationalFinancialReportingStandards or IFRS are the standards which are being adopted by many countries the world over, in an effort to bring about more transparency in the accounting practices. These standards have in fact evolved over the years with inputs from other prevailing standards and some of the shortcomings noticed over the years. Uniformity in adoptingfinancialstandards also helps in understanding the nature of business and standings in a better way. Though the international financing standards are being changed from time to time in order to make... the...
...Research Proposal The impact of global financial crisis on InternationalFinancialReportingStandards (IFRS) and financialaccounting
The purpose of this paper is to develop a research proposal for the selected research topic “The impact of global financial crisis on InternationalFinancialReportingStandards (IFRS) and financialaccounting”. The purpose of this research is to focus on the effects of global economic recession on...
...for further three years.” (IFRSs in your pocket, 2010)
The IASF is advising the IASB, which establishes internationalfinancialreportingstandards (IFRS), including exposure drafts, the setting up standards, and interpretations.
Since inception, the IASB has issued eight standards from IFRS 1 to IFRS 8 and 14 interpretation of the standard IFRIC 1 to IFRIC 14. The standard setting committee consists of
InternationalAccountingStandards Board (IASB) (IFRSs/IFRS for SMEs),
IFRS Interpretations Committee and
SME Implementation Group.
...there is no legal means of enforcing these standards. The lack of a strict enforcement mechanism makes it very difficult for international companies to apply IFRS principles in accounting. As such, these companies only follow these rules out of choice, especially because they want to achieve a global look, rather than following the formalities.
However, if in the event these companies, especially the multinational corporations with overseas subsidiaries, decide to adopt the IFRS principles across all their global installations, then they must be willing and ready to part with a significant percentage of their profits. This is because the process of...
...indicates that the company will be able to generate an estimated $100,000 net profit for the years 2015, 2016 and 2017.
Understandability. IAS 1 indicates financial information is prepared in a clear manner so all readers/users of the financialreports can easily understand the information (Weygandt et al., 2014). For the United States companies, the financialreports should be prepared using the international language, English.
Relevance. IAS 1 affirms the information submitted is related to the decision making process (Weygandt et al., 2014). For the income statement, all revenues, costs and expenses should be recorded...
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