IFRS a Global Accounting dream.


Posted July 25, 2012 by Pironcorp

Apart from financial statements, IFRS will have a great deal of effect on the IT systems too. New data fields, revised calculations, additional information and an almost complete reconfiguration of the business system will have to be incorporated.

 
The businesses worldwide need a common basis for measuring transactions. International Financial Reporting Standards (IFRS) are such set of principle-based standards, promoting globalization for business and finance all over the world. Many countries are moving towards implementation of these new standards. However, the actual prospects of IFRS are still being debated within the profession.

Critical assessments regarding IFRS

Critics have been blaming IFRS's fair value model of accounting as it will lead to a disproportionate increase in bank's profit figures. This will, in turn, lead to an increase in the profit statements, causing payment of greater dividends. Another factor causing IFRS adoption is that most find the concepts critical, making many financial statements difficult to understand. The standards have also been termed as 'flawed' due to these concepts.

In fact, a number of professionals still believe that GAAP is a better standard and should not be put to alteration. Companies which do not make a global presence won't even profit much by switching to IFRS.

Apart from financial statements, IFRS will have a great deal of effect on the IT systems too. New data fields, revised calculations, additional information and an almost complete reconfiguration of the business system will have to be incorporated. Implementing these changes will incur cost, almost similar for small- and large-scale businesses. However, smaller companies will be more adversely affected as they do not have as many resources as larger ones.

Positive implications of IFRS

While implementing IFRS may seem to be complex, its importance cannot be undermined. With greater IFRS adoption among countries, the non-IFRS compliant country stands at a disadvantage. Major benefits opening avenues for IFRS adoption are numerous:

The common IFRS protocol will bring all economies at the same level, regardless of any location differences.
The standards will promote common and a transparent working methodology across the globe.
Companies scattered across various countries will follow the same accounting rules, maintaining easy understandability of the financial statements across all offices.
Comparison of economic status with foreign competitors will also become easy.
In case of transaction costs, it has been shown that long-run benefits reaped from IFRS outweigh the costs incurred during transition. Thus, these standards lead to savings.
IFRS is such a financial reporting framework that allows admission to all of the world's stock exchanges and also helps building relationships with customers, suppliers and investors worldwide.

Wrapping up

IFRS are sure to reap a new wave of accounting standards, but the business is still on road. With more than 12000 companies and 120 nations, these standards assure a future bend towards them. But whatever be the result, education is the best medium to prepare for this massive change. Practical implications can only be utilized with skilled manpower and where change is evident; learning is the only definition to future reign.
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Issued By Pironcorp
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Categories Education
Tags accaifrs , ifrs study material , ifrs , online courses
Last Updated July 25, 2012