Importance of IFRS in Global Financial Reporting

Running head: ACCOUNTING THEORY AND APPLICATION
Accounting theory and application
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1ACCOUNTING THEORY AND APPLICATION
Introduction
IFRS (International Financial Reporting Standards) are set of the accounting standard
that is issued by the IASB (International Accounting Standards Board). It is reaching to the
global standard for preparing the financial statements of public companies. Near about 120
countries and the reporting jurisdictions obliges or allows the IFRS for the entities listed
domestically. However, near about 90 entities have already conformed fully to the IFRS
propagates by IASB (Ifrs.org, 2019).
Body
Modern economists generally depend on the transactions carried on to cross-border
level as well as free flow of the international capital. More than 1/3rd of the entire financial
transactions carried out across borders and it is expected that the number will grow further in
future. Further, the investors prefer investment and diversification opportunities globally
while the entities raise capital and carry out international operations or undertake the
transactions. If the national accounting standard is applied for reporting the value in the
financial report it may be computed on differential basis. These issues are addressed by IFRS
through providing the high quality and internationally identified accounting standard set that
enhances accountability, efficiency and transparency to the global financial market (Li,
Sougiannis & Wang, 2017). Various other advantages of IFRS are as follows –
 Transparency – IFRS enhances transparency through improving international quality
and comparability of financial information that allows the investors and other
participants in the market in taking knowledgeable economic decisions.
 Accountability – IFRS strengthens the accountability through dropping information
gap among the capital providers and people with whom they invested the money.
Further, the standard offers required information for holding the management to the
accounts. As the information source of global comparison, IFRS is considered as
vitally important to the regulators all over the world.
 Efficiency – IFRS contributes to the economic efficiency through assisting the
investors in recognising the risks and opportunities throughout the world which in
turn improves the allocation of capital. Further, for the purpose of business using of
the single and trusted language of accounting reduces the capital cost and lowers the
costs associated with international reporting (Zaidi & Paz, 2015).