Essay on International Financial Reporting Standards
4 Pages1298 Words252 Views
Added on 2020-06-04
Essay on International Financial Reporting Standards
Added on 2020-06-04
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Title: To identify the issues faced while harmonising domestic accounting standards with that of international standards such as IFRS.Background and Rationale of the studyIn order to develop standardisation in the accounting system and process IFRS wasintroduced. Moreover, in the absence of havingstandard accounting systemit wouldnot bepossible for the stakeholders to make comparison of financials with another.In the recent times,large number of companies isemploying IFRS and IAS with the motive to present fair andcomparable view of monetary aspects (Mhedhbi &et.al., 2016). However,it is not possible for thefirm to move from domestic accounting to the International with high ease. The main reasonsbehind this, in the case of international accounting system disclose requirements are increasedsignificantly as compared to the prior times (Markelevich, Shaw & Weihs, 2016). This in turnimposes issue in front of the accountants and thereby influences their overall. Hence, in this,scholar will conduct analysis and resolve issue by conducting thematic perception test. Byevaluating the view of accounts and supporting the same with the secondary data findingsscholar will present the issues related to the co-ordination of domestic and internationalaccounting system. Research aims and objectivesAim: The aim of the present study is to analyse the differences that takeplace betweendomestic and international accounting standards.Objectives Toassess and evaluate the system of traditional accounting system (DAS).To develop understanding about international accounting standards (IAS) such as IFRS.To identify the challengesthat isassociated with the harmonisationof domestic accountingsystem with international. Torecommend the ways through which co-ordination can be developed between domesticand international accounting system. Research questionsQ.1 Whatis the significance of traditional accounting system in the recent times?
Q.2 Howinternational accounting standards such as IFRS provides assistance in presenting thefair view of financials?Q.3 Whatare the challenges that influence the harmonisation level of traditional and internationalaccounting system?Literature reviewAccording to the views of Gomes & et.al., (2015)presentation of financial aspect orinformation differs significantly from traditional to international accounting system. Intraditional accounting, accountants do not lay more focus on presenting information in detail. Onthe other side, IAS focuses on reducing the forecast errors to a great extent (Nastase, Calin, &Margina, 2016). Hence, IAS requires more work and in-depth presentation of each aspect. On theother side, Henderson & et.al., (2015)presented that in DAS accountantsundertake depreciationmethod as per their convenience. Some business units depreciate assets on the basis of straightline and diminishing method. Whereas,IAS 16 entails that on initial level property, plant andequipment are measured at cost.Further, it is subsequently measured on the basis of either cost orrevaluation model (Urbanovič, Wilkins & Huisman, 2016). Hence, in this, amount is depreciated and allocate on a systematic manner. Thus, lengthyprocess of depreciation creates issue in front of accountants in relation to co-ordination. Incontrast to this, Florou, Kosi and Pope (2017) mentioned that divergence between DAS and IAShas no significant impact on earning management. However, itnegatively affectsthesynchronization of stock prices to a great extent.In accordance with Bamber & McMeeking(2016)treatment of reserves and impairment is shown indetail under IFRS. Hence, companieswhich are following DAS do not undertake in-depth process with the motive to save time. Thus,limited time frame and requirement of more resources imposes issue in front of accountants. Markelevich, Shaw & Weihs, 2016) stated that rules as well as regulations ofinternational and domestic marketing vary to the significant level. In the case of domesticmarketimg, accountant employs rules as per their understanding, knowledge and conveiencelevel. On the other side, international accounting system having specific rules regarding therecording of each and every transaction. Hence, it is the possibility that profitability aspect infinancial statement will decrease if accountant moves from domestic to international system.
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