Accounting Standards and YouThe acceptance of the common robust accounting standards came from various players of the capital markets with many multinational companies and national regulators providing their support, as they are optimistic of better outcomes. The use of common standards will make it very convenient for them to prepare public company financial statements and compare the financial results arising from the reporting entities from various countries and it would also become much easier for investors to comprehend the opportunities better. It would also enable the large public sector companies with subsidiaries in many productive areas to make use of one accounting language and present their financial statements in their almost same language as their competitors.
Moreover many also believe the fact that in a global economy, financial professionals including CPS’s and other companies will find themselves more convenient to react to the capital needs of their subsidiaries. Nevertheless many hold the opinion that there would be something missed if International Financial Reporting Standard (IFRS) is fully applied, as U. S. GAAP is the gold standard. (American Institute of Certified Public Accountants 2008: 5)Advantages of IFRS The reforms and changes that could be seen around post –Enron era also advocated the importance business and governments places on the transparency of the financial reporting.
Investors at the global level require easy to comprehend and reliable financial statements enabling them to make most efficient decisions on their capital allocations. One global standard would also make it convenient for the companies to make measurements and reports on the companies’ financial position and results making it convenient for them to show their efficiency while transferring their capital and labor between different countries.
(Brouwer 2005: 4)Those companies also should be converted to IFRS if they are subsidiary to the foreign companies or if they have investors from foreign lands. Besides it would be beneficial for the company if they want to raise their capital from more than one country. (American Institute of Certified Public Accountants 2008: 3)As taxes are also imposed on the global economy of the organization, it would be a great help to the national tax authorities all over the world if the net income is computed on the accounting principles and practices on the similar grounds.
It would also be very convenient for the companies to perform their operational analysis required to run their business. It would also make it convenient for the multi national companies to meet their disclosure requirements for stock exchanges all over the world. Disadvantages of Global Accounting StandardsIf the global accounting standards have created many opportunities for the companies to use with ease their financial statements in this competitive world, it is also not without its disadvantages.
Many U. S issuers having their customers or operational activities outside the United States may find themselves resisting IFRS because they must be devoid of the various market incentives to make preparation of the IFRS financial statements. Some of these issuers have to remain confined themselves to the U. S GAAP because it’s use in the fillings with other regulators and authorities.