Introductory financial accounting - Essay Example

storical cost basis of presenting the information is more consistent and reliable way of presenting the information as compared to recording the information at fair value. This is mostly due to the implausible assumptions behind the computation of fair values by the organizations. Current financial crisis has highlighted once again the issues related with the use of market to market and convergence of accounting standards. It is widely accepted that one of the key reasons for the financial crisis was mark to market accounting under which banks were forced to write down the values of their assets and hence book the losses in their accounts.

Mark- to Market value process therefore has the capability to create financial instability. (Enria, 2004). However, despite such arguments against the mark to market and convergence of accounting standards there are still important benefits or advantages which can be driven from the use of mark- to market accounting as well as the convergence of international accounting standards.( Ebling, 2001). The use of fair value accounting not only improves the characteristics of the financial accounting reporting but it also allow investors to have better insight into the overall affairs of the firm.

( Chisnall,2001). This report will therefore attempt to discuss the advantages of international convergence of accounting standards, assessing the impact of mark-to market on the profit and loss, balance sheet amounts as well as gross margins of Wesfarmers Ltd. Further advantages and disadvantages of the use of historical cost as well as the market value will be discussed. As discussed above that one of the key debates at the international level involve the convergence of financial reporting standards and developed a mutually agreed conceptual framework for financial reporting at global level.

This is also due to the fact that organizations are increasingly becoming global in nature with business interests in different parts of the