The following comments were made at an Anual Conference of the FinancialExecutve

Question

The following comments were made at an Anual Conference of the FinancialExecutves Institute (FEI)

THere is an irreversible movement towards the harmonization of financial reporting throughout the world. The iternational capital markets require an end to:

1. The confusion caused by international companies announcing different results depending on the set of accounting standards applied.

2. Copanies in some countries obtaining unfair commercial advantages from the use of particular national accounting standards.

3. The complications in negotiating commercial arrangements for international joint ventures caused by different accounting requirements.

4. The inefficiency of international companies having to understan and us a myriad of dfferent accounting standards depending on the countries in which they operate and the countries in which they raise capital and debt. Executive talent is wasted on keeping up to date with numerous sets of accounting standards and the never-ending changes to them.

5. THe inefficiency of investment managers, bankers, and financial analysts as they seek to compare financial reporting drawn up in accordance with different sets of accouning standards.

Instructions

1. What is the international accounting standards board?

2. what stakeholders might benefit from the use of international accounting standards?

3. what do you believe are some of the major obstacles to convergence?

Explanation / Answer

2. what stakeholders might benefit from the use of international accounting sta

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The case is concerned with international capital markets specifically and therefore those who operate in these markets would certainly benefit from the use of International Accounting Standards.  

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These include international investors, a group which is steadily increasing due to a trend towards globalization.  

======================================================================Internal stakeholders, including senior management, would also benefit from a standard set of rules to govern the financial reporting. This would eliminate alot of confusion when preparing financial reports.  

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The AICPA lists the advantages of convergence to IFRS which highlights the benefits to the company of such convergence:
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By adopting IFRS, a business can present its financial statements on the same basis as its foreign competitors, making comparisons easier.

====================================================================== Furthermore, companies with subsidiaries in countries that require or permit IFRS may be able to use one accounting language company-wide.

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Companies also may need to convert to IFRS if they are a subsidiary of a foreign company that must use IFRS, or if they have a foreign investor that must use IFRS. Companies may also benefit by using IFRS if they wish to raise capital abroad

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