Accounting

International Financial Reporting Standards (IFRS)

Beth Bernauer

MBA 606: Accounting for Managers

Individual Project

February 18, 2015

The International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB). The IASB is an independent organization based out of London, UK. IFRS are becoming the global standard in preparing of financial statements. IFRS was originally meant to help harmonize the European Union, but the concept was very appealing and has been implemented around the world. Approximately 120 nations either permit or require IFRS.

The Securities and Exchange Commission (SEC) regulates the securities industry by providing oversight to the Financial Accounting Standards Board (FASB), which interprets both the U.S. GAAP and IFRS. At this time, the SEC has not made a decision whether to adopt IFRS in the U.S.

The first advantage of adopting IFRS is that companies would be comparable. Companies would be on the same standards internationally, which make comparison of companies much easier. Users both internally and externally could comprehend the financial statements. Although comparability is a desired outcome of one set of accounting standards, not all cases would result in it. For instance, across different companies and countries that currently use IFRS, many of them have made their own exceptions.

IFRS has the potential to save companies money because they would no longer have to have two sets of books if they are globally recognized. The cost savings would not be realized for awhile because of the high transition costs. Because IFRS is more general, principle based, companies would hold more freedom to portray their financial performance. In addition, companies would have standardized financial statements. Additional benefits of IFRS accounting standards are that they promote investor confidence, facilitate free flow of capital, and are easier for...