International Financial Reporting Standards
The International Accounting Standards Board (IASB) came into being in the year 2001. The objective of this professional board was the development of a set of accounting standards, which could be accepted and adopted globally. This brought about the birth of the International Financial Reporting Standards (IFRS.) The set of standards fell in line with the globalization concepts. The standard ensured consistency in financial reporting thereby allowing for comparability of economic entities in different trading periods, and inter-organization comparison (Tondkar, Peng, & Harless, 2008, p. 448-468).
The adoption of IFRS could be viewed as inevitable for any economic entity steering towards the millennium development goals and the concept of globalization, especially the multinational and the internationally listed companies. However, the reception of this development faced the expected opposition from several stakeholders in the accounting profession. A Meta-analysis of IFRS Adoption is an article in The International Journal of Accounting, which explores further the adoption of the IFRS globally, the would-be benefits of such a move and the costs associated with the move (Ahmed, Chalmers, & Khlif, 2013, p. 173-217).
Financial Reporting Emperical Research
The article reflects on an empirical research that addresses the financial reporting, economic, and capital market impacts attached to the accounting regime change (Ahmed, Chalmers, & Khlif, 2013, p. 173-217). The studies contained a unique jurisdictional setting, research design and timing. The results from the research varied greatly ranging from the relevance of the adoption of the International Financial Reporting Standards, earnings transparency through discretionary accruals, and the effects of such standards in the quality of financial analysts forecast on earnings in the capital markets.
Adoption of the IFRS increases the accuracy of earnings’ prediction across the globe. This assists the investors in correctly choosing the right channels of investment (Tondkar, Peng, & Harless, 2008, p. 448-468). Intra-company and inter-company comparisons of financial reports make the adoption of the IFRS a viable idea while the networking economic benefits make the IFRS even more attractive. The IFRS make it easier for stakeholders in a given economic entity to understand and comprehend the information in the financial reports. This gets attributed to the principal of consistency which allows for the reporting of financial elements in the same way from one period to the other, and from one entity to another (Ramanna, & Sletten, 2009).
Empirical data used in the synthesis of the information in this article implied that there exists a gradual process in the adoption of the IFRS in different countries depending on the legal perspectives of accounting and the Local generally accepted accounting principles (GAAP.) However, countries that lacked a profound standard setting body, adopted the IFRS faster, if not at the rate in which the countries from which they borrow their accounting standards do. The process got to be slowest in the developed countries with well-developed local GAAP (Tondkar, Peng, & Harless, 2008, p. 448-468). The multinationals adopted the IFRS first to allow the inter-country comparison of financial reports.
Generally, the convergence of accounting standards globally has been a slow, but sure process. The adoption of standardized practices allows the standardization of the professional education in accounting. With time, the procedures will not only be accepted, but also implemented globally. This contributes in a mighty way to the thrust of the world towards technology steered globalization (Ahmed, Chalmers, & Khlif, 2013, p. 173-217).
- Ahmed, K., Chalmers, K., & Khlif, H. (2013). A meta-analysis of IFRS adoption. The International Journal of Accounting, 48(2), 173-217. Retrieved from http://www.sciencedirect.com/science/article/pii/S0020706313000472
- Ramanna, K., & Sletten, E. (2009, June 25). Why do countries adopt international financial reporting standards? HBS Working Knowledge. Retrieved May 26, 2013, from http://hbswk.hbs.edu/item/6212.html
- Tondkar, R. H., Peng, S., & Harless, D. W. (2008). Does convergence of accounting standards lead to the convergence of accounting practices? A study from China. International Journal of Accounting, 43(4), 448-468. Retrieved from http://www.scopus.com/record/display.url?eid=2-s2.0-56449123506&origin=inward&txGid=9F230F0996E7627FB4EF7F75387E7FC4.N5T5nM1aaTEF8rE6yKCR3A%3a2