With increasing globalization, interconnectivity and interdependence of international financial markets, the Demise of Enron Corp concept of adopting a harmonized language for financial reporting to boost and confidence in reporting and develop international comparability has become widespread.
The adoption of International Financial Reporting Standards (from now on IFRS, which include old and revised IAS) was the approach selected by an unprecedented number of countries and enterprises around the world. All member States of the European Union have adopted IFRS endorsed in the European Union for the preparation of consolidated financial statements of listed companies in their respective jurisdictions. More than 100 countries have agreed to require or allow adoption of IFRS, or have established timelines for the adoption of IFRS.
The overriding ambition in the utilization of international accounting standards is for a core set of standards is to ensure similar transactions are treated the equally by firms across boundaries, resulting in globally comparable financial statements. Accounting standard-setters and regulators around the globe are planning to harmonize accounting standards with the goal of creating one set of high-quality accounting rules to be applied around the world. However as a result of this transition there is evidence that this change in paradigm may not be able to repair fundamental existing issues due to variables outside of the control of the IFRS.
The difficulties and confidence and paradoxes placed in International accounting standards can be encapsulated by Former chair of the securities and exchange committee Mary Schapiro who largely supported the concept of convergence, but who was concerned by the lack of detail within IFRS standards compared to those already in place within the US ,believing that it would lead excessive interpretations, impose high transition costs, and remove the control of accounting standards from SEC. ( ) On top of all this, while the IASB and FASB still agree that harmonization is an eventual target, the process of convergence remains slow, and they keep postponing the timeline for eventual harmonization. This speaks not only to the complexity of actually implementing a common standard, but also to latent concerns, if not skepticism, on whether a single, international standard is even desirable or realistic.
The primary argument generally put forward is the issue of transparency: IFRS reduces the amount of reporting discretion relative to many local GAAP and, in particular, push firms to improve their financial reporting. thereby improving the availability of relevant, essential and accurate information which in turn are the platform for making good and accurate decisions thereby reducing information costs to an economy, particularly as capital flows and trade become more globalized: it is cheaper for capital market participants to become familiar with one set of global standards than...