The Role of Ifrs

IFRS ESSAY

Introduction

The International Financial Reporting Standards (IFRS) is a set of transparent, efficient and principles-based financial reporting standards developed by the International Accounting Standards Board (IASB). In the past decade, enhancing the comparability and credibility of company reports has aroused burning interest worldwide. The adoption of IFRS is widely recognizsed as the mechanism to achieve this objective, actually, about 147 jurisdictions presently use IFRS around the world. The standards are seen as making more high-quality, comprehensive and punctual financial accounting information to improving more informed valuation in the capital markets and reducing risk for stakeholders (Qu et al., 2012).

However, there is another voice opposes the view. Solomon(20xx) points out that IFRS does not apply to all countries and some developing countries in Africa should not adopt IFRS. Therefore, the purpose of this paper is to analyze the advantage and disadvantage of adopting IFRS. And this paper will focus on three questions that are ‘How does IFRS enhance accountability and to whom?’ ‘What are the objectives and benefits of adopting IFRS?’ ‘Why might a nation may choose not to adopt IFRS?’ The rest of this paper is organized as follows. Compare the relevant literature and discuss the role and significance of IFRS, followed by concluding remarks.

The role of IFRS

The official website of IFRS states that their mission is developing reliable IFRS Standards to boost trust, growth as well as long-term financial stability in the world economy. IFRS develop the standards by setting the agenda, research projects, standard-setting projects and maintenance four sections. Especially, they reduce the information on gap between the providers of capital and the people to whom they have entrusted their money to heighten accountability. This statement from IFRS website objectively indicates that IFRS is a source of internationally comparable information and it is essential to investors, regulators and other market participants over the world.

Moreover, Bruce (2011) states that International Financial Reporting Standards (IFRS) are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. This view concluded that IFRS are a consequence of growing international shareholding and trade and are especially vital for corporates that have business in several countries.

The benefits of adopting IFRS

A common presentation format and standardisation of approach changes things (Bruce, 2011). In other words, the common financial reporting language created an instant link in the due diligence. Currently there are more than 120 countries adopting IFRS, from this point can be explained by the use of IFRS has many benefits to different organizations.