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The Advantages And Disadvantages Of New Accounting Standards Ifrs

968 words - 4 pages

IntroductionIn 2002, the Financial Reporting Council (FRC) announced that Australia would adopt the accounting standards issued by the International Accounting Standards Board (IASB) from 2005(Baxter 2005). After the first of July 2005, the new standards (IFRS) start to use across national border. companies would be required to report current results under IFRS and restate recent results. They will also have to report their latest results under the old accounting standard, which should make comparing results on a like-for-like basis relatively straightforward. The purpose of this essay is going to give a general idea about advantages and disadvantage of IFRS, which has been widespread debate ...view middle of the document...

International companies can realise significant cost savings if they do not haveTo change their financial statements to conform to each country's rules, when listing on security exchanges (Neil 2002). In other words the access to main financial markets will become easier for global acting companies and by this it will be possible to acquire capital simpler for them. For example, a company, which has a subsidiary in Cuba, the parent company is located in Germany and the shares are listed on the NYSE. This company would have to prepare financial statements in Cuba, in Germany and in order to be listed on an U.S. stock exchange it would have to prepare also financial statements in accordance with U.S.-GAAP. Thus, its is easy to understand the advantage that a world-wide accepted set of Accounting Standards would have (Spulber 2001).From the standpoint of the users of financial statements. Investors, banks or owners are interested in obtaining information, which enables them to make buy/sell/hold investment decisions (Neil 2002). It is easier for users of financial statements to make useful comparisons between countries and companies with similar financial statements. This can be explained with the circumstances that similar transactions are accounted for and reported in the same manner everywhere in the world.International financial reporting standards are accepting by most nations over the time. The financial reporting council is working close with other countries to further minimise differences between Accounting Standards. For instance, the development of EU, which prescribes IAS with the beginning of year 2005, can be already considered to be a standardisation process.Disadvantage of the IFRSThe disadvantages of such an implementation mainly consist of the costs of the implementation itself.The risk that a new accounting system brings along in terms of possibilities for tax avoidance or fraud, that authorities composing...

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