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How the Use of IFRSs Contributes to Increased Transparency for Stakeholders - Essay Example

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How the Use of IFRSs Contributes to Increased Transparency for Stakeholders

Over the years the requirement of high-quality and uniform accounting framework has been extolled to foster international business relationship. The countries across the world are adopting IFRS leaving behind their local GAAP realizing the need for unified global reporting standards. The IFRS are the reporting standards which were issued by IASC till 2000 and then by IASC’s successor organization IASB which is a UK-based standard-setting body. IFRS is adopted by more than 100 countries following the efforts made by IASB and FASB for convergence of their respective conceptual frameworks. A topic by topic analysis of IFRS is not given here but empirical results suggesting the impact of IFRS adoption are provided. A subjective analysis by Ray Ball provides the potential advantages and challenges of IFRS to the investors. Empirical studies have suggested improved information environment of the firms following the adoption of IFRS. The adoption of IFRS has also led to increased cross-country equity investments by retail investors across the world. This means that the one of the most important indicator of economic stability i.e. ...
Transparency & Economic Stability under IFRS Corporate transparency can be defined as the dissemination of firm-related information to the outsiders who have direct and/or indirect financial stake in the firm. It is viewed as an indicator of financial reporting quality. Till now the countries had their own accounting standards but the globalisation has led to the emergence of comparable accounting standards so as to enable the users of financial information be able to assess the firm’s financial health. The concept of transparency is different among countries such as in US the concept is ‘fair presentation’ whereas in UK it is ‘true & fair view’. The financial reporting standards ensure the transparency in financial disclosures. IFRS are the reporting guidelines issued by IASB which is a standard-setting body based in UK. It includes International Accounting Standards (IAS) issued before 2001 by IASC, IFRS issued by IASB after 2001 and interpretations of those standards. IASB develops standards on the basis of clearly stated principles, also known as principles-based standards. This contrasts with the US GAAP which is considered rules-based standards. The adoption of IFRS helps the multinational firms in applying uniform accounting standards for all its subsidiaries. The IFRS is used by around 100 countries and since 2002 the convergence of IFRS and US GAAP is in process. This convergence is expected to bring more transparency in disclosures. The US companies are allowed to prepare financial statements according to IFRS without complying with US GAAP (Nandakumar et al, 2010, p.8). Figure 1 shows the results of survey conducted by AICPA regarded the public opinion to IFRS adoption as follows: Figure 1: Results ...Show more
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Critically assess how the use of IFRSs contributes to increased transparency for stakeholders, and the extent to which IFRSs can influence economic stability Contents Contents 2 Transparency & Economic Stability under IFRS 4 Conclusion 9 References 11 Introduction This paper is a critical analysis of the IFRS adoption by the firms and if this has enhanced the transparency in disclosures and influenced economic stability…
How the Use of IFRSs Contributes to Increased Transparency for Stakeholders
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