University Assignment: Auditing and Assurance - IFRS Reflection Report

This report reflects on the article "Contextual issues of the convergence of International Financial Reporting Standards: The case of Germany" by Hellmann, Perera, and Patel (2010). The report discusses the role of the International Accounting Standards Board (IASB) in setting accounting standards to harmonize financial reporting for multinational companies, emphasizing the importance of International Financial Reporting Standards (IFRS) for consistent presentation and specific disclosures. It highlights the significance of consolidated financial statements and examines the differences in their preparation between German and Anglo-American companies. The report also explains the concepts of de jure and de facto convergence and their impact on financial statement comparability. The conclusion suggests that the IASB is achieving its objectives, anticipating increased global adoption of consistent reporting standards. The report references several sources, including Flower (2015) and Lang and Stice-Lawrence (2015), supporting its analysis of the article's core themes and arguments. The report also examines the importance of contextual factors in the convergence of IFRS and the impact of these factors on the adoption of accounting standards.

Running head: AUDITING AND ASSURANCE
Auditing and Assurance
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Reflection on the Article:...........................................................................................................2
References:.................................................................................................................................4

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Reflection on the Article:
International Accounting Standard Board (IASB) is the prime body to set accounting
standards, which are intended to be followed by multinational companies for bringing a
harmony in the accounting treatments and reporting financial statements. Therefore, the main
objective of the IASB to formulates such accounting standards which will make the
accounting treatment of the companies similar to each other and as a result the reporting of
the financial performance and position of various companies would be in the same line. It
increases the comparability of the financial statements of companies from different
companies which gives an advantage to the potential investors to compare financial
performance and position of the company in which they are going to invest their funds
(Flower 2015).
International Accounting standards specifies the accounting treatments of the
transactions which make the accounting process of the companies similar, but it might not so
happen that they are reporting their financial performance and financial position in the same
line items. Therefore, to make sure that the companies are reporting their financial
performance and financial position in the same line items, International Financial Reporting
Standards (IFRS) have been developed. It specifies the way of presentation of financial
statement and specific disclosure requirements for some specific transactions. In the article
“Contextual issues of the convergence of International Financial Reporting Standards: The
case of Germany”, authors tried to exhibit the importance of internationals financial reporting
standards and the essence of it when the reporting of financial statement of multinational
companies comes into question (Hellmann, Perera and Patel 2010). The article focused
mainly on the preparation and presentation of the consolidated financial statement as it is the
main financial statement based on which investors and stakeholders make their decisions. In

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context of Germany, the difference between preparation of the consolidated financial
statement by the German companies and Anglo-American companies differs widely and there
are various multinational companies who are operating their business both in Germany and
America. Hence, to make their financial performance and financial position comparable to
each other, companies must be using same principles and standards for preparation and
presentation of their consolidated financial statement.
De jure convergence in accounting and reporting is the accounting practices that are
according to the specific standards and rules while De facto conversance is the commonly
practiced accounting principles. If there is a significant difference between these two in
practical accounting domain then there will be an issue in similarly presentation of financial
statements. To make these two conversances same in the accounting domain, implementation
of international accounting and reporting standards becomes the essence (Flower and Ebbers
2018). As the importance of the international reporting standards has been widely accepted
and understood by most of the stakeholders, most of the multinational as well as national
companies are following international accounting standards for recording financial
transactions in the books of accounts and they are also following the international financial
reporting standards for preparation and presentation of the financial statements. Hence, it can
be commented that the IASB is achieving its objective and it can be expected that in recent
future years, most of the companies all over the world will be following the same reporting
standards thereby making the financial accounting and reporting similar to each other (Lang
and Stice-Lawrence 2015).

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References:
Flower, J. and Ebbers, G., 2018. Global financial reporting. Macmillan International Higher
Education.
Flower, J., 2015. The international integrated reporting council: a story of failure. Critical
Perspectives on Accounting, 27, pp.1-17.
Hellmann, A., Perera, H. and Patel, C., 2010. Contextual issues of the convergence of
International Financial Reporting Standards: The case of Germany. Advances in Accounting,
incorporating Advances in International Accounting, 26(1), pp. 108 – 116.
Lang, M. and Stice-Lawrence, L., 2015. Textual analysis and international financial
reporting: Large sample evidence. Journal of Accounting and Economics, 60(2-3), pp.110-
135.