Perceived Costs and Benefits of IFRS Adoption in Asian Countries

This assignment discusses the perceived costs and benefits of adopting International Financial Reporting Standards (IFRS) in Asian countries. It examines the professional accountants' perceptions and the implications of IFRS for auditing and accounting professions. The adoption of IFRS in ASEAN countries and the differences in implementation are also discussed.

Running Head: FINANCIAL ACCOUNTING THEORY
FINANCIAL ACCOUNTING THEORY
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Role of IFRS and IAS in the Development of International Accounting Standards.............2
IFRS convergence and the adoption in ASEAN....................................................................3
Benefits of IFRS Standard Adoption.....................................................................................5
Differences in the Implementations of IFRS.........................................................................6
Conclusions................................................................................................................................7
Reference....................................................................................................................................9

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Introduction
The aim of this assignment is to discuss on the perceived costs as well as benefits of
the adoption of the International Accounting Standards in the Asian Countries. Adopting
International Financial Reporting Standards sets the procedures that must have to be followed
by the organization when they are adopting IFRS for the very first time as the basis for the
preparations of the general-purpose financial statements. Hence, under this assignment
discussion will be on application of the broad knowledge of the business practices in the
diverse context. The purpose of the assignment is the examination of the professional
accountant’s perceptions in the Asian Countries and the perceived benefits that are associated
with the International Financial Reporting Standards in the respective nations and the
implications of the standards for the auditing and accounting professions in the country in
which they practice. Under, this assignment, discussion will be also be done on the extent of
the adoption of IFRS/IAS standards of accounting supported by state, government and the
local accounting bodies professionals (Zaidi and Paz 2015).
Discussion
Role of IFRS and IAS in the Development of International Accounting Standards
The assistance of the ASEAN countries is done by the major development financing
institutions that includes Asian Development Bank and World Bank, which is mainly because
of the developments of the globalized capital markets, multi-national enterprises growth as
well as Asian financial crisis in mud of the 1990s. It is because of the requirement of the
creditors and investors is for getting the up-to-date reports and the financial statements, the
professional practices of the ASEAN countries are increasingly being scrutinized
(Kusumasari 2016). Therefore, because of this, ASEAN countries are immensely in pressure
for adopting the accounting standards that depicts uniformity of standards across the borders.

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The convergence of the localized accounting standards with that of the IFRS is one of the
rising concerns among the stakeholders with the major interest in the ASEAN countries.
Access to the global market becomes very problematic without having the institutionalized
set of the practices of accounting. Since from the year 2005, most of the listed companies that
are located in the Australia, New Zealand and European Union prepare the consolidated
financial statements according to the IFRS (Zaidi and Paz 2015). As per International
Accounting Standards Board, IFRS has been adopted by more than 150 countries. Many
countries in ASIAN region have adopted formally IFRS in the year 2012, but the accounting
setters and their regulators have faced so many challenges after the adoption. The objective of
the harmonization of the local standard with the IFRS is for reducing the differences of the
practices of the accounting among the countries (Wardhani and Anggraenni 2017).
According to Mahesh Joshi, the accounting professionals in the countries such as
Malaysia, Indonesia and Singapore have supported strongly the adoption of IFRS, their
opinions of them does not differ significantly by the professional qualifications, experiences
as well as training place. It has been analyzed that the countries have benefitted from the
harmonization with the global accounting standards (Joshi, Yapa and Kraal 2015).
According to Diane Kraal, the IFRS has the benefits that include increase of the
foreign investment; reduction of the equity cost as well as confidence of the stakeholders has
eroded by complex harmonization of the requirements of the principles based ‘fair value’
(Kraal, Yapa and Joshi 2015).
IFRS convergence and the adoption in ASEAN
From the early globalization campaign by IASB, application of the IFRS unmodified
in the ASEAN countries has been criticized in some of the researches. Among the five
ASEAN countries, the extent of the harmonization of accounting have achieved high degree

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of the harmonization of measurements in areas of the consolidated financial statements,
inventory, long-term investments, marketable securities as well as expenditures of research
and development (Phang and Mahzan 2017). Following are some of the countries and their
instance of the IFRS adoption.
 Indonesia
The accounting standards of Indonesia have drawn heavily upon the sources of US and
the Indonesian Accounting Principles that are formulated by IAI in the year 1973, which was
directly adopted from the material published by AICPA in the year 1965. IAI announced
regarding the convergence of the local standards as well as the IFRS during the year 2012.
The approach of the Indonesia to the adoption of IFRS is for maintaining the national GAAP
as well as converging it gradually with the IFRS as far as possible (Wardhani, Utama and
Rossieta 2015). Indonesia has made objectives for providing the period of transition of three
to five years for the new standards and minimizing the gaps between effective dates of the
new Indonesian and the new IFRS. Indonesia has taken general approach with the regard of
convergence of the local standards with the IFRS that starts with the minimization of
significant differences that exist between the two (Phan 2014).
 Singapore
The history of the Singapore dictates that the professional training as well as accounting
standards is influenced by the accounting practices of British. The examination of IAS
standards was done for propriety of the adoption in the context of Singapore. Most of the
IFRS was adopted by the Singapore as well as it has modified the some of it, which are
locally known as the Singapore Financial Reporting Standards (Perera and Chand 2015). The
incorporated companies of Singapore has allowed for using IFRS that are issued by IASB
rather than SFRS, in case if Corporate and Accounting Regulatory authority of the Singapore

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will grant the approval. Moreover, the incorporated company of Singapore, which are listed
on both of the securities exchanges in the Singapore as well as the securities exchanges that
are outside Singapore are permitted for using the IFRS as issued by IASB, in case if foreign
securities exchanges requires for using the IFRS (Sambaru and Kavitha 2014).
 Malaysia
Malaysia, before the independence was under the rule of British for more than 80 years,
the history of it is reflected by the reporting and accounting standard practices. The formal
accounting standards of accounting were aligned gradually with IAS in the year 1970s after
their emergence. The regime of Financial Reporting Standards was adopted by the Malaysia
in the year 2006 (Susela Devi and Helen Samujh 2015). The companies of Malaysia were
required for implementing all FRS that are issued by MASB in the presentation and
preparation of the financial statements. In the year 2011, the approval of new MASB
accounting framework was issued by the MASB that was named as MFRS Framework.
MASB states that all the companies, which are required for applying MFRS framework are
the entities that are other than the private entities have to apply to the MFRS framework for
the beginning of the annual period, with having the transitioning entities exception that are
given options for continuing with old FRS framework (Nguyen and Gong 2014).
Benefits of IFRS Standard Adoption
There are certain benefits for the adoption of IFRS Standards that could be helpful in the
perceived cost as well as benefits are as follows:
 IFRS standards helps in addressing the challenges with the help of providing the high
quality, set of the accounting standards that are internationally recognized, which
brings accountability, transparency as well as efficiency to the financial markets.

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 It helps in bringing transparency by the enhancement of the international
comparability as well as financial information quality by enabling the investors as
well as other participants of the market for making the informed economic decisions.
 IFRS helps in strengthening the accountability by the reduction of the gap of
information between the capital providers as well as the people for whom they are
entrusted with their money. The information helps in providing the information that
are needed for holding the management for account. For the globally compatible
information, standards of IFRS are the most vital and important to the regulators
(Sharma, Joshi and Kansal 2017).
 It helps in contributing to the efficiency of the economy by helping the investors for
identifying the opportunities as well as risks all across the world, which helps in
improving the allocations of the capital. For the business organizations, use of single
and the trusted standards of accounting lower the capital cost as well as reduces the
international reporting costs (Kusumasari 2016).
Differences in the Implementations of IFRS
Apart from having several perceived benefits for the convergence of accounting
standard, there are still certain limitations of the uniformity of the accounting rules and
practices nationally and internationally between the countries. Hence, some of the limitations
are as follows:
 The differences in the system of the taxation may affect the choices of the accounting
such as depreciation choices and capitalization decisions (Sharma, Joshi and Kansal
2017).
 The differences in the political as well as economical forces determine and influence
the financial reporting. The forces of political and powerful local economy determine
the way of interpretations and the implementations of the rules.

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 The decisions made by the particular country for modifying the particular IFRS before
the adoption may also create the differences (Kaya and Koch 2015).
 There may be the differences in the applicability as well as enforcement of the IFRS
between the countries such as there may be the differences in the monitoring of the
enforcements and the compliance and many more.
 There may be differences in the implementations, enforcements and monitoring.
Uniformity of the accounting practices would not be possible without the international
consistency in enforcement and implementations of the accounting standards (Houqe,
Easton and van Zijl 2014).
 There may be the situation when the investors may misled by believing that the
financial reporting is consist of high quality.
 IFRS brings legitimacy level to the financial reporting of the country despite of
having certain limitations in enforcement level of standards.
 It is having disadvantage for those particular country, which have the requirements of
high quality of the standards implementations, enforcement and monitoring of the
IFRS (Garanina and Kormiltseva 2014).
Conclusions
Therefore, it can be concluded from the analysis that Convergence and harmonization
helps in increasing comparability of the accounting practices by the minimization of the
degree of variations. Moreover, it has been analyzed from the analysis that the realization
sped of the ASEAN trade, integration with the global standards of accounting as well as
ensuring the centrality of ASEAN in global business has influenced accounting standards in
respect of the countries for converging the local standards with the IFRS or adoption of IFRS
completely. It has been analyzed from the analysis that as compare to the Malaysia and
Indonesia, the country Singapore is having more positive outlook about the economic

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benefits that are gained from the adoption of IFRS. In particular, Singapore has agreed that
the local and the state professional accounting bodes plays the important role in the process
of the adoption of IFRS. Further, it has been found that there are certain perceived cost and
benefits associated with the convergence of accounting practices that has be considered while
adopting the convergence in the particular country. Therefore, it can be said that the objective
of the single global set of high quality of the financial accounting standards may not be
achieved if the developing countries such as Indonesia and Malaysia does not adopt fully
IFRS but adopts selectively the standards that reflects their current practices as well as
meeting their interest of nationals.

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Reference
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IFRS by Design, Impair Comparability with Countries That Have Not Adapted
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Houqe, M.N., Easton, S. and van Zijl, T., 2014. Does mandatory IFRS adoption improve
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