International Harmonization of accounting standards

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1. Critically discuss the advantages of global harmonization of accounting standards as well

as the difficulties in IASB's efforts.

IFS are accounting !rocedures and strategies governing the re!orting of different ty!es of

accounting transactions and events in the financial statements. Financial standards such as

IFS are im!ortant because they !rovide the bac"bone for the integrity and trust in the

financial mar"ets. #enerally Acce!ted Accounting $rinci!le %#AA$& used by the nited

States is issued by the S based Financial Accounting Standards Board %FASB&. (ost of the

countries follow IFS. )he International Accounting Standards Board %IASB& sets IFS and

they are trying to achieve their goal by im!lementing one set of accounting standards

globally. )his goal is es!ecially im!ortant due to the increasing globalisation and the growing

number of multinational organisations %Samir* (.S* +,,-&. Suitable and adeuate safeguards

and safety nets need to be built into national accounting systems to achieve the ob/ectives of

harmonization.


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Advantages

I. $resentation of Financial Statements

0n the off chance that IFS is ado!ted* then it would give reliable !resentation of financial

statements alongside uniform measures for ac"nowledgment* estimation and e!osure of any

transactions. It will bring down com!leity of worldwide income taation* as they are on the

aggregate wage of the organizations* and the organization alongside its other foreign

com!any ta"e after com!arable boo""ee!ing rule and !ractice. At the !oint when all

enter!rises are reuired to hold fast to one arrangement of accounting standards* s!eculators

can be sure that the financial data they utilize is eact and can be contrasted and between all

organizations and over all the business sector areas.

II. esolving Sovereignty issues

Falling in accordance with IAS2IFS would mean changing or giving u! national accounting

standards. )here can be instances of uncertain issues that are !articular to a s!ecific nation

and the way of business in that that reuires a s!ecific rule that should be embraced. It

em!owers an efficient audit and assessment of the eecution of a multinational organization

having auiliaries and !artners in different nations wherein every nation has its own

!articular arrangement of accounting standards.

III. 3isting on Foreign Stoc" 4change

)he Com!anies ta"ing after local boo""ee!ing standard are confronting issues in getting its

stoc" recorded on cross5boundary stoc" trade. 6ith im!lementation of IFS* the

organizations will never again be reuire to set u! its financial statement under various

accounting standards and ma"e the underta"ing of !osting shares on foreign stoc" echange

easier.


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I7. Com!arison8

Following different set of accounting standards* com!aring financial statements of com!anies

o!erating in same industry and in different countries are difficult* as the same transaction may

be treated in different ways. (ultinational organizations and analysts would encounter ease in

loo"ing at financial statements of organizations found and wor"ing in various locations.

7. )ransition Cost

)he organizations need to bring about one time move cost towards changing its accounting

framewor"s* overhauling control system and archiving it. Further* IFS oblige organizations

to give financial statements to no less than one earlier year or might be u! to three years for

S4C listed organizations. Also* the organizations need to contract eternal consultant to

!re!are their wor"ers and e!lain e!erts and financial analysts with IFS.

9isadvantage


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I. Amendments to the eisting 3aw

It is detected that eecution of IFS might bring about various irregularities with the current.

$resently* the re!orting reuirements are administered by different controllers and their

!rocurements override different laws. IFS does not !erceive such overriding laws. 9es!ite

the fact that !rogressions to revise these laws will be started if IFS is embraced* the !owers

need to guarantee that the laws are corrected well in time.

II. )aation

IFS im!lementation would influence the ma/ority of the things in the financial statements

and hence the ta liabilities would li"ewise e!erience a change. :ence the ta assessment

laws ought to address the treatment of duty liabilities emerging on eecution from #AA$ to

IFS. It is critical that the ta collection laws !erceive IFS agreeable to the financial

statement or else it would co!y authoritative wor" for the associations.

III. e!orting Systems

9isclosure and re!orting necessities under IFS are totally not the same as the Indian

re!orting !rereuisites. 0rganizations would need to guarantee that the current business

re!orting show should be corrected to suit the re!orting necessities of IFS. )he data

framewor"s ought to be intended to catch new necessities identified with altered resources*

section e!osures* related !arty transactions. $resence of legitimate control and minimizing

the ris" of business interru!tion ought to be dealt with while altering or changing the data

framewor"s.

I7. Fair value


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IFS utilizes fair value as an estimation base for esteeming the ma/ority of the transaction of

financial statement. )he utilization of fair value accounting can bring a considerable measure

of un!redictability and sub/ectivity to the financial statements. It li"ewise includes a

considerable measure of diligent wor" in touching base at the reasonable uality and

valuation s!ecialists must be utilized. In addition* changes in accordance with reasonable

worth result in increases or misfortunes which are reflected in the !ay !roclamations.

6hether this can be incor!orated into figuring distributable benefit is additionally faced off

regarding %Sr"ant* S* +,,;&.

+. 9escribe the im!ortance of having an o!timal level of disclosures and critically discuss the

challenges that may be faced by IASB is reducing the amount of disclosures in financial

statements in view of ma"ing financial statements more understandable


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It is said that enhancing corres!ondence between the clients and !re!arers of financial

statements has been an antici!ated ob/ective to be accom!lished by every sta"eholder.

$artners are stating that the data in the disclosures are hel!ful and could yield better choice

ma"ings* more organized information and less re!etitive.


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It is a disadvantage to the organization if the disclosure includes com!lete and uantitative

disclosure of confidential information which could benefit the com!etitor to hurt the

organization's !osition in suit cases. nder this method of reasoning* organizations are

willing to !ersevere through the dismay of analysts and different grou! of !eo!le of financial

statement with a s!ecific goal to secure the com!etitive advantage %Buzzichelli* F = $ietra*

. 9.* +,1-&.

)he ca!ital mar"ets li"e disclosure because it gives a clearer view of ris"s* so more disclosure

should reduce the com!any>s cost of raising cash. Academic research has also noted that

greater disclosure reduces the individual investor>s cost of research* ma"ing investing "eener

to invest in a com!any. 9isclosure gives a clearer !ers!ective of ris"* so more disclosure

ought to decrease the organization's e!ense of raising money. Scholarly research has

additionally noticed that more !rominent revelation diminishes the individual financial

s!ecialist's e!ense of research* ma"ing contributing more !roficient and drawing investors.

6hat's more* more !rominent disclosure enhances value !roductivity. As it were* narrowing

the swings in cost ordinarily seen when financial s!ecialists* uestionable about what's truly

going on* fli!!ing in the middle of ecitement and misery. (ore !rominent disclosure* in this

way* causes share !rice to !recisely mirror an organisation>s actual uality* and that eact

estimating urges administrators to contribute their very own greater amount riches* givingthem a more grounded motivating force to !erform well.

eference


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Buzzichelli* F.* = $ietra* . 9. %+,1-&. is" !rofile disclosure reuirements for Italian

insurance com!anies8 9ifferences in the financial statement !re!aration. Financial

Reporting, %1&* ?-5@.

'0!timal 9isclosure'8 6hy Firms eed to Balance ':ard' and 'Soft' Information 5nowledgeD6harton. %+,1?* (ay +E&. etrieved from

htt!822"nowledge.wharton.u!enn.edu2article2o!timal5disclosure5firms5need5balance5hard5soft5

information2

9isclosure overload and com!leity8 :idden in !lain sight. %n.d.&. etrieved from

htt!s822www."!mg.com2S2en2IssuesAndInsights2Articles$ublications29ocuments2disclosure

5overload5com!leity.!df

Financial statement disclosures 4nhancing their clarity and understandability. %+,1?* A!ril&.

etrieved from htt!s822www.!wc.com2us2en2cfodirect2assets2!df2!oint5of5view5financial5

statement5disclosures

Samir, M. S. (2003). Harmonization of Accounting Standards. CharteredAccountant, ICAI, Januar 2003.

Sr!ant, S. (200"). Accounting Standards # $i%% the &or%d 'e ta%!ing same%anguage Chartered Accountant, ICAI, e'ruar 200".

http://knowledge.wharton.upenn.edu/article/optimal-disclosure-firms-need-balance-hard-soft-information/http://knowledge.wharton.upenn.edu/article/optimal-disclosure-firms-need-balance-hard-soft-information/https://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/disclosure-overload-complexity.pdfhttps://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/disclosure-overload-complexity.pdfhttps://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/disclosure-overload-complexity.pdfhttps://www.pwc.com/us/en/cfodirect/assets/pdf/point-of-view-financial-statement-disclosureshttps://www.pwc.com/us/en/cfodirect/assets/pdf/point-of-view-financial-statement-disclosureshttps://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/disclosure-overload-complexity.pdfhttps://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/disclosure-overload-complexity.pdfhttps://www.pwc.com/us/en/cfodirect/assets/pdf/point-of-view-financial-statement-disclosureshttps://www.pwc.com/us/en/cfodirect/assets/pdf/point-of-view-financial-statement-disclosureshttp://knowledge.wharton.upenn.edu/article/optimal-disclosure-firms-need-balance-hard-soft-information/http://knowledge.wharton.upenn.edu/article/optimal-disclosure-firms-need-balance-hard-soft-information/


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