The paper "International Accounting Standards Board, Research and Development Expenditures" is an outstanding example of finance and accounting assignment. The acronym IASB refers to the International Accounting Standards Board. It is an autonomous, private-sector institution that is responsible for developing and approving International Financial Reporting Standards (IFRSs). It operates under the oversight of the International Financial Reporting Standards Foundation and was established in 2001 as a replacement for the International Accounting Standards Committee (Deloitte, n.d. ). According to the International Financial Reporting Standards (2015), the mission of the IASB “ is to develop IFRS that brings transparency, accountability and efficiency to financial markets around the world” .
The International Financial Reporting Standards (2015) has further noted that as part of the mission, the work of IASB also serves the interest of the public by promoting trust, growth, as well as long-term financial stability in the global economy. Harmonization of accounting practices is the process of improving the suitability or compatibility of accounting practices by establishing limits on the extent to which these practices can vary. The process of harmonization of accounting standards or practices will not be affected by conflicts of logic and it can enhance the compatibility of financial data from different nations.
This means that harmonization does not take a one-size-fits-all approach but it provides accommodation to some of the agreements. It is more open and flexible. On the other hand, standardization of accounting practices involves the determination of a collection of rigid rules and the application of one rule or standard in any situation. In standardization, the determined standards do not provide accommodation for the dissimilarities between countries. Standardization is more difficult to implement globally since it entails harmonizing accounting standards relating to disclosure and measurement, disclosures by public companies that relate to securities offering as well as listing on the stock exchange, as well as harmonization of auditing standards (BERTHA08, 2012). There is always a strong and constant debate for, as well as against, the adoption of International Financial Reporting Standards.
According to Tarca (2013), one of the arguments that are often put forth in favor of the adoption of IFRS is that the use of a single set of high-quality standards by business firms globally has a prospect to improve the transparency and comparability of financial information and minimize the costs associated with the preparation of financial statements.
Secondly, Tarca (2013) further suggested that when these standards are applied meticulously and in a consistent manner, capital market players will have access to better quality information for more effective decision making. Consequently, markets can allocate funds in a more efficient manner and companies can achieve lower capital costs. The third argument in favor of IFRS is that adoption of IFRS increases mutual fund ownership and cross-border investment for mandatory adopters by reducing the cost of information processing for foreign investors as a result of improved comparability of financial information, as well as directly by eliminating barriers like geographic distance (Tarca, 2013). On the other hand, one of the arguments against the adoption of IFRS is that the supposed benefits of improved transparency in financial reporting and the corresponding lower capital costs are overstated.
It is not likely that financial reporting practices will improve considerably because of IFRS adoption. The supposed advantages of cross-border comparability are exaggerated because IFRS is not capable of doing anything when it comes to other factors that may affect reporting like a country’ s legal institutions, capital markets, a firm’ s governance and business practices, as well as the personal motives of managers.
While a single system of financial reporting for international firms is one of the major selling points of adoption of IFRS, this ignores statutory or national reporting for the foreign subsidiaries of international companies. These issues will continue to generate divergence or deviation in reporting (Ulvog, 2011).
Secondly, the supposed reduction in the cost of capital, reflecting enhanced information comparability and increased disclosure will only occur in countries that have strong legal enforcement (Tarca, 2013). In fact, Ramanna & Sletten (2009) have suggested that adopting IFRS may be costly if the relative quality of a country’ s accounting standards and its related governance institutions are mutually not compatible with the IFRS. The other argument against the adoption of IFRS is that in case something arises that would be viewed as deterioration or drop in the accounting methods from the U. S.
perspective, there is only one simple option: they frequently raised concern that IASB could establish new IFRS that may not suit American investors or firms could be addressed by devising a national endorsement procedure for amended and new IFRS, something that many countries that already adhere to international standards have too. Consequently, if a particular rule is not favorable according to the American perspective, the country can opt-out, something that other nations are currently doing (Ulvog, 2011).