University Report: Accounting in Context (Macquarie) - Finance Module

This report, prepared by a student, provides an analysis of accounting in context, specifically focusing on the convergence of International Financial Reporting Standards (IFRS). The report examines the role of the International Accounting Standards Board (IASB) in harmonizing accounting standards, highlighting the limitations of accounting and financial reporting that make full international standardization difficult. It discusses the increasing adoption of IFRSs and the continuous efforts of the IASB to improve convergence. The report also delves into the issues surrounding de jure and de facto convergence, including official endorsement challenges, translation and interpretation problems, implementation costs, training and education gaps, and lobbying influences. References to relevant literature are provided to support the analysis.

Running head: ACCOUNTING IN CONTEXT (MACQUARIE)
Accounting in Context (Macquarie)
Name of the Student:
Name of the University:
Authors Note:

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ACCOUNTING IN CONTEXT (MACQUARIE)
Contents
Answer to Q1:..................................................................................................................................2
Answer to Q2:..................................................................................................................................3
References:......................................................................................................................................5

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ACCOUNTING IN CONTEXT (MACQUARIE)
Answer to Q1:
National accounting boards of different countries are the members of IASB. IASB with
the support of its members continuously looks to improve the existing accounting and financial
reporting standards to achieve harmonization in accounting and financial reporting. The inherent
limitations of accounting and financial reporting make it almost impossible to formulate single
sets of internationally acceptable accounting and financial reporting standards (Camfferman and
Zeff, 2015). Thus, harmonizing the accounting and financial reporting standards is a complex
process. However, the continuous efforts by the IASB to formulate better and effective standards
to reduce the alternative accounting principles and policies has improve the process of
convergence over the years (Oulasvirta, 2014).
The reason for increase in the number of countries using IASs and IFRSs for accounting and
financial reporting purpose is mainly attributable to the efforts of IASB to harmonize the
financial reporting environment by using convergence process. Even the US is also moving
towards converging its GAAP with the IFRSs. Having a single set of accounting and financial
reporting standards such as IFRSs will go a long to improve the quality of financial reporting in
all across the globe. The IASB with its efforts has improved the process of convergence.
However, the process is a continuous process thus, efforts are still on to improve the process of
convergence continuously. Hence, IASB is certainly achieving its objective (Oulasvirta, 2014).
Answer to Q2:
The issues in De jure and De facto convergence are enumerated below:
Official endorsement:

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ACCOUNTING IN CONTEXT (MACQUARIE)
IASB does not have the power to make IFRS compulsory until unless the official endorsement is
made via legislation. Often the time lag between release of accounting standards and the
endorsement creates the problem of comparability of financial reports between countries using
the released standards and the countries not using the standards as the standards are yet to be
endorsed (Yu et. al. 2017).
Issue relating to translation of IFRSs:
Translation of IFRSs into different languages, mainly 22 official languages often lead to number
of problems such as indifferent meaning of same words in English IFRS and IFRS in other
languages. Such differences in words often changes the meaning of the standard to a certain
extent. This creates problem in adoption of IFRSs.
Issues in interpretation:
Interpretation of IFRSs has to be exactly same in different countries otherwise the objective of
harmonization in accounting practice would not be achieved. One of the qualitative
characteristics, comparability, of financial statements will be hindered if the interpretation of
IFRSs is different in different countries.
Implementation cost:
The implementation cost to prepare three sets of financial statements is likely to lead to a huge
burden to a company. The cost to implement the current requirements of IFRSs would increase
the cost of accounting and financial reporting significantly.
Training and education issue:

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ACCOUNTING IN CONTEXT (MACQUARIE)
It is important to have continuous training and education model to keep the professional auditors
and accountants up-to-date with the amendments in existing accounting standards and
introduction of new accounting standards.
Lobbying:
The lobbying to satisfy the national accounting standards instead of following IFRSs in
preparation and presentation of financial statements is another reason for differences between de
jure and de facto convergence (Henisz and Mansfield, 2016).

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ACCOUNTING IN CONTEXT (MACQUARIE)
References:
Camfferman, K. and Zeff, S.A., 2015. Aiming for global accounting standards: the International
Accounting Standards Board, 2001-2011. Oxford University Press, USA. [Online] Available
from: https://books.google.co.in/books?
hl=en&lr=&id=6bTlBgAAQBAJ&oi=fnd&pg=PP1&dq=objectives+of+international+accountin
g+standards+board&ots=2whpdU6n9T&sig=Pb1ZXpZZBet6nTjaOqx-P-
CQd1Q#v=onepage&q=objectives%20of%20international%20accounting%20standards
%20board&f=false [Accessed 02 October 2018]
Henisz, W.J. and Mansfield, E.D., 2016. The Political Economy of Financial Reform: de Jure
Liberalization vs. de Facto Implementation. Working paper. The University of Pennsylvania.
Oulasvirta, L., 2014. The reluctance of a developed country to choose International Public Sector
Accounting Standards of the IFAC. A critical case study. Critical Perspectives on
Accounting, 25(3), pp.272-285. [Online] Available from:
https://www.sciencedirect.com/science/article/pii/S1045235412001347 [Accessed 02 October
2018]
Yu, D., Xu, Q., Xiao, J., Huang, B. and Hu, G., 2017. De jure adoption and de facto
implementation of FV accounting in China. In The Routledge Handbook of Accounting in
Asia (pp. 62-88). Routledge.