Convergence to Ifrs

Convergence to IFRS

Intermediate Accounting II – Research Paper

In the past years, people have been seeking a set of high quality global accounting standards that companies could consistently use and investors would understand. The International Accounting Standards Board (IASB) is an independent not-for-profit organization that developed such a thing in which today we describe as the International Financial Reporting Standards (IFRS). The IFRS is a set of accounting standards that provides a structure for the way public companies all over the world, except the United States where the US GAAP is followed, prepare and disclose their financial statements. It basically guides public companies in the preparation of their financial statements. The implementation of the IFRS has its benefits and its drawbacks. In addition to that, if the IFRS is implemented, the FASB will play a huge role in that implementation.

There are many benefits that come from the implementation of the IFRS. One benefit is the ease of using one consistent reporting standard in subsidiaries from different countries. It is important for large companies that have subsidiaries in different countries to have an international standard. Having one set of worldwide standards allows a company to use one reporting method, simplifying accounting procedures and providing investors and auditors a solid view of their finances. This will allow different companies to be on the same page when presenting and understanding other companies’ financial statements.

Other benefits include improved management information for decision making, better access to capital, including from foreign sources, reduced cost of capital, better cash management, and it make it easier for mergers and acquisitions. Since the IFRS provide a universal accounting language, it improves the communication among subsidiaries, allowing management to make better decisions. The use and availability of resources enhances because the...