Adopting a Label - Heterogeneity in the Economic Consequences Around Ias/ifrs Adoptions

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Adopting a Label: Heterogeneity in the Economic Consequences around IAS/IFRS Adoptions

Introduction

Accounting is an important practice in an organization as it ensures the survival and the success of the organization. Accounting helps organization in measuring the performance of their policies and strategies as wells as guiding them in making corrective measures. Different organizations have different methods and policies of performing the practice, which consequently, yield different results. In addition, the standards of accounting differ from one country to the other depending on the set rules and principles. However, accountants felt the need of having a universal set of rules and principles that would help in establish a common reporting ground. This led to the development of the International Accounting standards (IAS), which is a set of common internationally accepted standards of accounting. This made it possible for comparison between different financial records because they now shared the similarities of a common format (Chalmers and Jayne 155).

Connected with the International Accounting Standards is the International financial Reporting standards (IFRS). IFRS is a language of reporting of accounting records, which makes it possible for the comparison of different accounting records and information even in the international field. Globalization and the emergence of new world markets have led to the need of a common method of preparing financial statements and reporting. For instance, globalization has led to the development of trade blocks for example, the European Union (Chalmers and Jayne 185). Member countries would like to compare their performances, and that would only be possible through analysis of financial statements. Therefore, common accounting principles and techniques becomes an absolute necessity in such countries. Adoption of the IAS/IFRS by different organizations in the world has its own economic consequences. It has brought with it some economic benefits as well as leading to the emergence of economic problems in some instances.

Purpose of the paper

Organizations had different options and ways of adopting and implementing the international standards of accounting and reporting. They could either decide for themselves whether to adopt the standards (voluntary) or the government forced them to adopt the new international standards (mandatory). This paper looks at the economic consequences of the adoption of these international standards. It will also focus on how organizations in different countries adopted the international standards. There were those organizations that adopted the standards because it was the current issue, which can be termed as adopting a label. There were also organizations that adopted the international standards of accounting and reporting because they had a strong believe and motive of enhancing transparency in their operations (Schutt 134).