Financial Reporting

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Running head: Financial Reporting
Financial Reporting
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1Financial Reporting
Introduction
International Financial Reporting Standards
The International Financial Reporting Standards (IFRS) is a kind of international
accounting framework. In this the main purpose is to properly organize the financial
information’s. It has been derived from the London based international accounting standards
board (IASB). It is used in more than 120 countries as the frame work for the accounting
standard. It is majorly used by business reporting their financial results in any part of the
world. It is not used in USA. GAAP is followed in USA. The difference between them is that
GAAP is more rule based than IFRS. IFRS is easier than GAAP as it uses simple
interpretation to understanding.
There are many advantage and disadvantage of the usage of IFRS:
Advantages
The comparability: the business which follows this method of reporting can easily compare
the reports with each other. It is extensively used by business that are based in different
countries. This method followed helps the investor to identify the strength or weakness of the
financial statement.
Beneficial to any kind of investor: As IFRS is simpler thus it aids in understanding for the
investors. Small and new investors gets a better quality which is simple for them to
understand and does not require major professional skills (Grzegorz, M. 2008).
Flexibility: The IFRS is totally based on principle and not only on rules. There is a standard
of arriving at a goal for a reasonable valuation of the company. Thus the financial statement
becomes easier for understanding.

2Financial Reporting
Disadvantage of IFRS:
High Cost: the business may be large or small the impact of IFRS is felt majorly. The
amount required for implementing the rules of IFRS needs new recruitment and the cost may
be high which is not possible for small business to manage.
Prone to manipulation: The business is free to use whatever method they wish to use that
may inflict manipulation in the financial statement to show profit only. The new set of
standards needs changes on to how the new rule be applied and that should be justified and
needs that all the company that follows it should value the statement in the same manner.
Not accepted globally: US does not accepts the IFRS. This means that reporting of the
accounting data by foreign companies operating in these countries may face difficulties as
they will be preparing financial statement using the set of standards and other set of
principles that is accepted in countries.
IFRS is followed in many countries but also it is not accepted in many other parts of
the countries that may lead to difficulty in understanding the financial report and also
difficulty in comparisons for the investors. The benefits are also majorly beneficial for the
investor.
II) The IFRS financial approach is globally appropriate reason being that it was established to
make the accounting language easy and common so the business can report the finances
easily country to country and company to company easily.
 As the method is easier and this can be easily understood by the both the investor and
companies. They become confident in investing in the business practices becomes
reliable and transparent.
 Both companies and investors benefit from IFRS because people are more confident
investing in a company if its business practices are transparent and reliable.