International Financial Reporting Standards - Essay Example

International Financial Reporting Standards Task International Financial Reporting Standards (IFRS) IFRS is a set in international accounting standards developed by the IASB with the main goal of providing a global framework for public companies in the preparation, as well as the disclosure of their financial statements. Consequently, the financial reporting and disclosure standards provided by IFRS act as a guideline for the preparation, reporting, and analysis of financial statements provided by public companies.

This is unlike this is unlike the other existing financial reporting frameworks which, on the contrary, set rules, and regulations with the key aim of governing the preparation, presentation, as well as the reporting of these financial statement. As such, it does not outline an industry specific platform that guides and regulates its style of reporting. The existence of financial reporting standards acknowledged across the global platform, such as IFRS, is important especially to multinational corporations and global companies that operate in different countries across the world, with subsidiaries and interests in countries with different approaches to financial accounting and reporting.

Therefore, the existence of such internationally acknowledged reporting standards enables these corporations to consolidate their financial statements, especially when returning the profits from subsidiaries to the parent company. A good example of such a multinational corporation that has overseas subsidiaries is the MacDonald’s Chain of Restaurants, whose mother company is in the united states but is has a global presence with its restaurants located in major markets across the world such as Asia and Europe.

Despite the numerous benefits that come about to international corporations with their use and application of the IFRS guidelines, its application is not so efficient as an accounting practice because it acts merely as a guideline and not as a rule, or a principle, which accountants should follow and adhere to when preparing and reporting financial statements. This rule out the possibility of all companies applying these standards in their reporting and preparation of financial statements because there is no legal means of enforcing these standards.

The lack of a strict enforcement mechanism makes it very difficult for international companies to apply IFRS principles in accounting. As such, these companies only follow these rules out of choice, especially because they want to achieve a global look, rather than following the formalities. However, if in the event these companies, especially the multinational corporations with overseas subsidiaries, decide to adopt the IFRS principles across all their global installations, then they must be willing and ready to part with a significant percentage of their profits.

This is because the process of standardization of these financial reporting standards across different accounting markets is very expensive. These companies will incur massive costs in making changes within their internal systems of accounting in an effort to make them compatible with IFRS principles. These costs dramatically reduce the profitability margins of these companies, thereby making it a very costly exercise for multinational corporations, as well as other companies operating on a global scale with international interests.

In conclusion, it is my suggestion that these standards be scrapped off from the financial accounting platform as they bring about more losses that profits, which is quite the opposite of the cardinal rules in business engagement.ReferencesCollings, S. (2012). IFRS for Dummies. Hoboken, New Jersey: John Wiley and Sons.Holt, G., Mirza, and A., & Knorr, L. (2011) .Wiley IFRS: Practical Implementation Guide and Workbook. Hoboken, New Jersey: John Wiley and Sons.Kirk, R. (2009). IFRS: A Quick Reference Guide.

Amsterdam: Elsevier Books.