. International accounting standards are currently being discussed world-wide. C
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Question
. International accounting standards are currently being discussed world-wide. Convergence, harmonization and implementation are current buzz words. There are many folks in all fields of accounting that feel this convergence to one set of rules is very necessary. There are those who take the opposing view and feel that it is a waste of time, money and effort the FASB being among this group. Considering all, discuss the following:
a. the advantages and disadvantages of uniform accounting and reporting standards.
b. the advantages and disadvantages of having separate accounting and reporting standards for each country individually based upon their unique business environment.
c. issues that may occur when a country adopts part but not all of IFRS.
Explanation / Answer
a. Advantages and disadvantages of uniform accounting and reporting standards.
Advantages
Due to technology development , world has shrunk and become one large global community- with people traversing all along the globe- transcending religion,caste and creed.Business and finance compulsions require common accounting practices and disclosures -to enable investors and interested parties to elicit wanted informations- on a common/uniform platform.Uniformity facilitates comparability of figures by the investors , to decide on the country of their investment.Also, once started ,it is easy and less cumbersome, to implement.--with no necessity for the users to convert and understand.
Disadvantages
IT may be costly for small countries to implement- may be unviable and not justified. May not be wanted for a country with whom there may not be much trade links.Uniform accounting is highly superfluous for normal book-keeping function. Unique transactions, peculiar to the country , may not receive the due treatment.
b. Advantages and disadvantages of having separate accounting and reporting standards for each country individually based upon their unique business environment.
Advantages
People of the country who do not travel much are more conversant with the local rules and regulations than with the globally uniform one. This is simple and easy to understand - even for a moderately educated common man -with very little.finance background. Uniqueness of the countries' transactions are preserved.
Disadvantages
The country may lose on foreign businesses for not adapting to global accounting environment. Comparability of figures is not possible.Companies may manipulate their figures , for want of one more level demanding. transparency
c. Issues that may occur when a country adopts part but not all of IFRS.
Adopting IFRS partly ,even if recommended to begin with, is bound to prove to be cumbersome for the country as well as the end-users of all its financial informations. There is no one stand and people may try to take advantage on non-compliance and non-implementation. Processes may be delayed and there may be evasion of responsibility.Workload of accountants may be multiplied in the initial stage.
It will take a large amount time, even generations, before uniform accounting like IFRS is achieved because every country has to work over-time to change their internal reporting and compliance mechanisms also - in toto.
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