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Resulting from this difference, IFRS gives the management flexibility and discretion in preparing the financial statements of a company.
In the recent past, most nations have moved towards adopting a common globalized accounting standard. As such, use of IFRS in many parts of the world has gained widespread prominence and popularity. Regions such as the European Union, Australia, Hong Kong, Singapore and Russia, and other countries have adopted the use of IFRS. In January 2011, Canada adopted the use of IFRS officially; consequently, many countries switched from their accounting standards and adopted the IFRS standard of Canada. The widespread acceptance of International Financial Reporting Standards portrays a fundamental change in the accounting profession. This stems from the fact that the use of IFRS has become a common phenomenon in the accounting profession (Nandakumar et al 2011, p. 3).
About 100 countries either allow or require publicly held companies to use IFRS while preparing their financial statements. The Securities and Exchange Commission (SEC) in America has considered setting a date in order to allow U.S. public companies to adopt the use of IFRS. The process of setting international standards started several decades back. Industrialized nations saw the need to devise standards, which could be adopted by small and developing nations unable to come up with their own standards for accounting. With the globalization of business, investors, regulators, auditing firms and large companies realized the vitality of adopting common standards that could apply in all aspects of financial reporting (Kirk 2008, p. 2).
The adoption of IFRS has some considerable benefits to the company and the investors who adopt these standards. The adoption of international standards allows the governments, and investors and organizations to have a comparison of the financial statements
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To achieve this harmonization of present and future reporting standards, the parties agreed to launch a short-term project and thereafter, engage in joint programs so that by the first day of 2005, the remaining inconsistencies between their financial reporting standards would finally be eliminated (MOU 2002).
The US GAAP, (Generally accepted accounting principles) is another framework which is followed in many countries. This was created before IFRS. Though the purpose of creating these two frameworks is same but there are many differences in the policies and rules in both of the framework.
To date, a total of 41 IAS have been released; however, 10 have been superseded by other IAS or IFRS (International Financial Reporting Standards); and 2 have been withdrawn by International Accounting Standards Board - IASB (IAS Plus, 2009).
In addition to a description of each standard, this paper briefly discusses how the potential users of financial statement can benefit from the use of these standards.
Due to these evolving financial relations between countries, the need to establish a common, convenient and comparable standard for accounts and financial reports.
The perceived need to establish a comparable and convenient system of accounting and financial reporting, by promoting harmonisation to establish similar transactions led to the establishment of the International Accounting Standards Committee (IASC).
Uniformity in adopting financial standards 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 accounting practices contemporary, yet the full version of IFRS came into being in the year 2005 when more than 8000 companies in the EU region decided to adopt these standards (Banerjee, 2008).
All subsequent local markets eventually report to a centralized office which oversees the global aspects of the corporation, areas in technology, finance, marketing, human resources, and others. In designing the organizational structure for international operations, the structure should meet both the strategies of the home office and the requirements of the local market.
The current status of SEC acceptance of IFRS statements for the US based companies is described below.
SEC seems shifting from US GAAP to IFRS statements for the US based companies because of the differences between these two
The IFRS uses and recommends the use of a standard set of framework, sort of a new language to communicate financial reporting, as explained by KPMG. KPMG said that IFRS “represents a complete change in the language of financial
This being the case, it would then be easier for such a tax framework to be enforced globally more so in a uniform manner, thus helping to seal all the loopholes that exists in different accounting frameworks that are applied by different
To this effect, it had shipped a huge amount of cards, which were included in revenues. The difference arose when auditors disputed this move by proposing the cards be indicated as unrealized sales. I think the auditors erred in their point of view because for previous
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