Benefits of IFRS Adoption

INDUSTRY ENGAGEMENT 1
Industry Engagement
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INDUSTRY ENGAGEMENT 2
Industry Engagement
Introduction
International Financial Reporting Standards basically known as IFRS are the set rules that
ensure financial statements are equal in all parts of the world. The International Accounting
standard board issue out financial reporting standards which should be applied in making of
financial statements. IFRS encompasses several accounting activities like, the statement of
financial position, statement of changes in equity, statement of cash flow and statement of
comprehensive income. The International Accounting Standard Board ensures that the set rules
are transparent, reliable and similar round the globe. Furthermore, they govern how companies
should control their accounting hence coming up with a consistent language in accounting and
statements hence guiding investors in making financial decisions.
Theoretical Review
The theory of cost principle focuses on recording of asset as required. Also, the asset can
be depreciated overtime depending on the kind of asset (Oulasvirta, 2016, p 8). Some may be
depreciated as long for 30 years while the others can be depreciated depending on the estimated
economic life. The depreciated is guided by the accounting standards used by the country.
Therefore, the theory is relevant since IFRS give international presentation of depreciations of
assets so that they can be comparable to other international companies. Further, the multinational
companies need to have a uniform presentation of financial report that can make it easier to
determine asset acquisition and depreciation across all the branches.
According to the theory of institution, it explores the resilient aspects of social structure
(Lok, 2017, p.22). Companies need to be organized and changed until they become stable.

INDUSTRY ENGAGEMENT 3
Processes like norms, rules, and routine are established to guide social behavior. The adoption of
IFRS is in line with the theory, since it a process that makes the organization more stable ad able
to compete adequately with other firms. The change of organization through the adoption of a
ruled based accounting standard help the company to position itself in a batter place both locally
and internationally.
The agency theory is also relevant in the adoption of new accounting standards since it is
expensively employed to predict and explain performance of external auditor (Mihret and Grant,
2017, p.703). The theory is used to settle the issues that arise between the principals and those
they have entrusted to run the business. According to the theory it suggests that the agent need to
act in the best interest of the principal. The theory directs on how the auditing should be done
and also predicts the internal auditor’s function and responsibility. It provides a theoretical
framework on how the adoption of IFRS can benefit the agents by placing the company in a
more competitive edge compared to using other accounting standards. It is necessary to use the
globally accepted accounting reports so that it can help in expansion of the business which works
for the best interest of the owners
Opportunity
The IFRS provides a company with opportunities that makes it better to compete locally
and internationally. Adoption of IFRS increases the chance of cross-border listing which comes
with increased demand of the products in the international market. So the company can exploit
the opportunity by gathering the available resources to avail the products to global customers.
Additionally, the company can expand through subsidiary development into other countries to
exploit the opportunity.