Impact Of Adopting Ifrs In Ghana

Key benefits of IFRS

There are certain aspects of business practice for which IFRS set mandatory rules. This will save staff time, and perhaps even part of their work hours, and eliminate the operational risks mentioned earlier. With the Government’s decision to defer the implementation of Ind-AS, the new set of Indian Accounting Standards, which are fully converged with IFRS, the enthusiasm for the transition to IFRS has receded. India has decided in favor of convergence with IFRS, rather than adopting IFRS.

Key benefits of IFRS

The first and foremost assumption is that the sole concept will guide all number crunching, evaluation, estimation, and recording that the business or the company will continue its activity. In other words, the business continues for the foreseeable future, and there is nothing like business is coming to an end. IFRS mandates the components of how to report and prepare the balance sheet.

Annual Improvements

As IFRS grows in acceptance, most CPAs, financial statement preparers and auditors will have to become knowledgeable about the international standards. Others, such as actuaries and valuation experts who are engaged by management to assist in measuring certain assets and liabilities, are not currently taught IFRS and will have to undertake comprehensive training. Professional associations and industry groups have begun to integrate IFRS into their training materials, publications, testing, and certification programs, and many colleges and universities are including IFRS in their curricula. Some textbooks are already covering IFRS, primarily in a comparative presentation to their instructions on U.S. The IASB is an independent accounting standard-setting body, based in London.

Key benefits of IFRS

Orjioke opined that public companies, institutions e.t.c. can achieve rapid growth and development if they are made to follow the regulation guiding financial reporting. To Emenike cited in Ejike research into the regulation of financial regulation in public related offices/companies has been scanty over the last decade. The problem of this study is to examine the extent of the adoption of IFRS in Nigeria which is key to economic transportation and growth. The management of organization seeks to establish rules and laws to guide how they relate to each other to at least reduce conflicts.

Recognition Of Elements Of Financial Statements

The United States is moving toward adopting IFRS but hasn’t committed to a time frame. The FASB and IASB are working on harmonizing the two accounting standards. The FASB believes that seeking more comparable global accounting standards—improving the quality of accounting standards used around the world while reducing differences among those standards—is consistent with its core mission.

IFRS influences the ways of reporting the components of a balance sheet. Hence, the IFRS system ensures a high level of responsibility in the financial reporting and disclosure system. It will affect many aspects of a U.S. company’s operations, from information technology systems and tax reporting requirements, to internal reporting and key performance metrics and the tracking of stock-based compensation. Since true and fair view accounting depends on difficult-to-verify information, the quality of this information depends on management incentives to report reliable information. A principles-based philosophy means that the goal of each standard is to arrive at a reasonable valuation and that there are many ways to get there.

It is because of the presence of US GAAP and other accounting standards. Nevertheless, work is ongoing to consolidate accounting standards across the globe. IFRS is the abbreviation for International Financial Reporting Standards. It is a set of rules and guidelines that every firm has to adhere to ensure their financial statements are consistent with other firms worldwide.

Disadvantage: Increased Costs

This reduction in the US home bias following the mandatory IFRS adoption is greater for countries with significantly different local standards in the pre IFRS adoption period (I. K. Khurana and P. N. Michas ). There is a significantly positive association between a country’s use of IFRS and increased US investment in foreign equities under a strong regulatory environment (K. M. Shima and E. A. Gordon ). There is a positive impact of mandatory IFRS adoption on IPO underpricing and capital source in global markets. This reduction in IPO underpricing is higher for firms in countries experiencing large accounting changes and are more evident among firms in countries with strong implementation credibility. Mandatory IFRS adoption reduces more underpricing for global IPOs than domestic IPOs, since foreign investors face greater information asymmetry than domestic investors, and thus benefit more from improved financial reporting (H. A. Hong, M. Hung and G. J. Lobo ).

Key benefits of IFRS

A balance sheet using this system might show a higher stream of revenue than a GAAP version of the same balance sheet. IFRS specify in detail how companies must maintain their records and report their expenses and income. They were established to create a common accounting language that could be understood globally by investors, auditors, government regulators, and other interested parties. They were issued by the London-based Accounting Standards Board and address record keeping, account reporting, and other aspects of financial reporting.

Key Initiatives

Without standardized practices and this level of trust, there is little doubt that much fewer transactions would take place. The absence of such a compelling risk-mitigating system would also lead to higher transaction costs and could potentially impact the economy significantly.

  • Regarding improved quality, the authors note that empirical evidence indicates that the quality of the financial reporting process has more to do with the manner in which standards are enforced than differences in the standards themselves.
  • The reporting is made voluntarily, which is a result of regulatory requirements.
  • Under this model, journals will become primarily available under electronic format and articles will be immediately available upon acceptance.
  • The Internet, transportation technologies, and communication tools encourage us to use a system of globalization today more than ever before in human history.
  • Financial ReportingFinancial reporting is a systematic process of recording and representing a company’s financial data.
  • Investors and other stakeholders find it more convenient to compare their business performance with other international companies.

Research also suggests that these costs and benefits will vary across firms and will be difficult to trace upon adoption. Li complement and extend prior relevant literature by investigating whether the role of uniformity leads to improved financial statement comparability.

Conceptual Framework For Financial Reporting

The advantages and disadvantages of IFRS work to eliminate the reconciliation of the books that must happen under the current system so that there is a unified picture available before making future decisions. Creditors would no longer face this issue when comparing or evaluating the creditworthiness of agencies operating abroad.

Companies that use the same standards to prepare their financial statements can be compared to each other more accurately. This is especially important when comparing companies located in different countries, as they might otherwise be using different rules and methodologies to prepare their statements.

Checking Your Browser Before Accessing Journals Sagepubcom

While IFRS requires that changes to the application of the rules must be justifiable, it is often possible for companies to “invent” reasons for making the changes. Stricter rules would ensure that all companies are valuing their statements the same way. It would improve the rates of foreign direct investment around the world. It would reduce the time, effort, and expense of preparing multiple reports. Case studies of IFRS implementation in Brazil, Germany, India, Jamaica, Kenya, Pakistan, South Africa and Turkey.

This assumption implies that all financial transactions and recordings will consistently happen in the common standard currency across accounting periods. It further directs that a company will record the assets and liabilities at their acquisition value or original cost. It helps track the flow of transactions, records funds information, and works towards attaining a security level for direct and indirect foreign investments across nations. This accounting standard is essential when we are dealing with significant assets or getting into heavy transactions. The AICPA is engaged in a healthy debate at the Securities and Exchange Commission over the best way for the U.S. to adopt such standards, if applicable. Based on member surveys, the Institute believes that a three- to-five-year timeline will be required for public companies and the accounting profession to successfully transition to IFRS. As a result, the AICPA has urged the SEC to set a “date certain” for any future IFRS adoption provided that certain key milestones are achieved.

Optional Exemptions From The Basic Measurement Principle In Ifrs 1

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The first and primary difference between the two is that IFRS is suggestive and principle-based. Principle-based frameworks are flexible, while rule-based ones are more rigid. This assumption implies that a business will recognize the impact of transactions as they occur and not when it results in cash inflow and outflow. In other words, a transaction happening or an event is essential rather than the exchange of money, which can occur in advance or later on. To establish a universal language for the companies to prepare the accounting statements. On the positive side, other companies, like IBM, may gain greater efficiencies and stronger controls from a move to IFRS. For example, converting to IFRS would make it possible for IBM to create a globally shared service center for accounting, rather than having accounting departments in different regions.

Ifrs And Us Gaap

The two accounting standards can show quite different results for the same company, which is why convergence proponents advocate using one global accounting standard. It strengthens accountability by bridging the gap of incompetent financial reporting. For example, last year, the Johannesburg Stock Exchange Key benefits of IFRS fined a sugar firm Tongaat Hulett Ltd. Its financial statements, account reports, and other information details did not comply with IFRS and were incorrect. The standards help investors make wise decisions regarding their investment by providing a clear picture of company reports and financial statements.

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