Pros and Cons of International Financial Reporting Standards (IFRS) for Investors

Running head: ACCOUNTING STANDARDS AND THEORY
Accounting standards and theory
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Introduction:
The report is prepared for demonstrating the advantages and disadvantages of

1ACCOUNTING STANDARDS AND THEORY
International financial reporting standards (IFRS) to investors. International financial
reporting standards are the standards that are issued by independent organization based in
United Kingdom that is International accounting standards boards. It was ascertained that the
uniform accounting standard had substantial ignorance of making it mandatory. Agreement
about the implementation of important commercial transactions is the fundamental economic
functioning of the accounting standards. The integral component between firms and its
stakeholders such as lenders, shareholders, suppliers, customers and managers are method
used for accounting (Grabinskia et al. 2014). Efforts are made by such organization in
narrowing down the gap between accounting standard of different countries and IFRS.
Countries under this concept are not required to make the recognition of IFRS standards and
can comply their reporting with the standards of respective countries. The discussion of pros
and cons of such international standard is done by making reference to the given article
“international financial reporting standards (IFRS); pros and cons for investors”, Accounting
and Business Research, International Accounting Policy Forum, pp. 5-27.
Discussion:
World is witnessing increased integration of politics and markets and that is what
making the integration of adoption of accounting standards inevitable. The contracts

2ACCOUNTING STANDARDS AND THEORY
efficiency between firms and their lender have become more transparent with the
implementation of IFRS. The working on convergence project of IFRS comes with the
likelihood of addition of this particular standard by almost all countries over the world. There
are varieties of potential direct advantages attributable to investors resulting from the
widespread international adoption of IFRS (Hagen 2016).
Therefore, the advantages that are derived by equity investors from the international
standard can be divided into direct and indirect advantages. Comprehensive, accurate and
timely information about the financial statements of different reporting entities will be
provided to investors using the IFRS platform. Many of the adjustments made in the
financials of company would be eliminated with the adoption and this will facilitate
comparison between entities and help in providing relevant information to investors.
Investors risks pertaining to adverse selection of stock and being les informed will also be
eliminated with the help of such international standard (Gallego et al. 2016). Furthermore,
IFRS also promises increased transparency and accordingly increasing efficiency between
investors and firms. Equity investors will be at advantageous state in terms of reduced cost of
capital along with increasing debt market contract efficiency. The ability of investors to make
informed financial decisions is triggered by the adoption of such standard as it will contribute
towards elimination of confusion arising from financial measures used in different countries
and using different ways for measuring financial status of reporting entities. Among various
investors, the standard will help in creating a fairness and establishment of code of conduct.
There will be greater scope for investor to make international investments and the financial
resources will be effectively allocated worldwide. Moreover, there will be increased
attraction of foreign and institutional investor’s for making investment in different countries
and accordingly this will lead to diversification of the risks by widening their portfolio of
stocks (Nastase et al. 2016). It is seen that as the world of business comes closer with the help