Report on Contemporary Issues in Accounting and Financial Convergence

This report delves into contemporary issues in accounting, focusing on the convergence of international financial reporting standards (IFRS). It examines the benefits of convergence, such as enhanced comparability, transparency, and reduced cost of capital, while also addressing the challenges involved, including implementation costs and complexities. The report highlights the importance of IFRS adoption for companies seeking cross-border listings and expansion. It also discusses specific issues like revenue recognition and the impact of converged standards on businesses. The conclusion emphasizes the significance of adopting these standards to remain competitive in the global market. The report also references various sources to support the claims made.

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Contents
Introduction:...............................................................................................................................3
Convergence:..............................................................................................................................3
Issues and challenges:................................................................................................................5
Conclusion:................................................................................................................................6
References:.................................................................................................................................7

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Introduction:
The main aim of these standards is the fact that the adoption of them would lead to an
increase in the capital markets efficiency. It would lead to a higher quality of the comparable
when benchmarking is done in the market. There would be a greater amount of transparency
and there would also be a cross border comparison for the investors and that too at reduced
cost (NCBI, 2017).
Another objective of adoption of these standards is the harmonisation of the international
accounting standards is the recognition of the worldwide effort to restore in the confidence in
the corporate reporting and also to create in the free flow of the capital across the world. One
of the reasons as to why these accounting standards have been complied with is the fact that
there needs to be a creation of one single capital market (CS online, 2017). The companies
are able to make an unreserved statement as to the preparation of the IASB standards and the
audit reports that would be able to be referred to compliance to an entity with the standards of
the IASB. That would help the company in participation and competing with the market. The
second aim of these standards is the fact that these accounting standards would help the
investors in the cross border comparison by the investors which leads to the reduced cost of
capital for the companies of the country and also would assist them in raising or listing
overseas. Also, the convergence of the stated standards would take on some time for being
implemented (Mondaq, 2017).
Convergence:
The convergence is expected to yield many benefits for the company. There would be a better
comparability and also a greater transparency. These standards would help in the financial
comparison of the companies and its comparability. The comparison would be done without

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considering the basis on which the same have been prepared (Research gate, 2017). There
would be a greater transparency about the activities of the company to the outsiders. The
companies usually revolve in and around their global environment and when the standards
would be globalised, then these companies that had been revolving around their environment
would be able to be compared with other companies across the other borders. These
companies reside in the different jurisdiction and have different rules and regulations that
they have to stand by and hence, a dual set of the financial statements may be required to be
prepared for the external financial reporting. The first is the local statutory financial reporting
which is in the home country and the other for the parent company. The adoption of these
standard includes a greater amount of effort on the part of the companies but then there is
also a complexity involved wherein there would be an increase in the complexity with which
the financial reporting would be done. This could be reduced in case the company opts for
multiple reporting. The adoption of these standards would reduce in the barriers that are
caused by the cross border listings and this would make sure of the financial statements being
ore transparent. In many of the cases wherein there is a listing on the exchange over the cross
borders, the investors would assume in the additional amount of the risk premium in case the
financial information is no prepared using the international accounting standards. Hence in
the nutshell, the adoption of the standards would help in reducing the risk premium and
ultimately in the reduction in the cost of capital (Network world, 2017). The adoption of
these standards also is very important since that would open the doors for the companies for
being listed in the different stock exchange of the world. These companies that are seeking to
get listed on the world wide stock exchange have been doing so since they are looking for
more capital in order to meet their requirements for expansion and also expand in the new
ventures. There is also an issue which is related with this. It is mainly that when these
companies converting the financial statements of the past years using theses new standards,

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then that would amount to increase in the costs which would amount to an additional burden
on these stated companies (Digital marketing institute, 2017).
Issues and challenges:
There are many issues and challenges that the companies face. There are some of the basis
principles such as the notification of the converged standards, resolutions of the treatment of
the taxes under the IFRS which are still in the course of being completed. This is crucial for
rolling out the accounting regime which is converged into these accounting standards (IFRS,
2017).
A study was undertaken as per which the impact of the adoption of the IFRS on the quality of
the Australian financial reports a positive result through the way of making improvements in
the value of the relevance of the reports on accounting after the adoption of the stated
standards and also after the reductions in the number of the firms in the earnings management
(Ernst and Young, 2017).
There has been a change in the terms of the contact wherein consideration has been paid. The
company is bound to make a payment for the goods or the service. There are many retailers
and producers of the goods that provide a discount or a coupon, rebate etc. or also free
products to the customers. The apt accounting treatment would be identified when the
company establishes the fact of the payment whether the same for a separate good or service.
The company has to establish the fact whether there is a reduction in the price that has bene
offered to whether it is the combination of both of these. There are many of the
manufacturers of the consumer products that pay a lesser amount to the retailers so as to have
their goods displayed on the shop shelves (Ernst and Young, 2017). These shelves could be
physical or be virtual. Since this does not provide a distinct good or a service to the

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manufacturer, hence the same is treated as the reduction in the transaction price (Ernst and
young, 2017). The stated amendment would affect the business of Cailfresh since the amount
of the revenue that the company used to report in its financial statements would be reduced
since some of the deductions would be made from the transaction price charged from the
customers.
Conclusion:
In the end, in case, the US does not go for the convergence, then it would not be able to cope
up with the other companies across the world. It would not be able to benchmark its
companies with the companies that are operating across the world. There is an increase
chance that the US would not go for the adoption and the implementation of these new
standards though.

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References:
Mondaq.com. (2017). International Accounting Standards - What�s Happening? -
Accounting and Audit - Australia. [online] Available at:
http://www.mondaq.com/australia/x/28945/International+Accounting+Standards+Whats+Ha
ppening [Accessed 10 Sep. 2017].
PwC. (2017). IFRS in the US. [online] Available at:
https://www.pwc.com/us/en/cfodirect/issues/ifrs-adoption-convergence.html [Accessed 10
Sep. 2017].
www.ey.com. (2017). The new revenue recognition standard – retail and consumer products.
[online] Available at: http://www.ey.com/Publication/vwLUAssets/EY-ifrs-developments-
retail-and-consumer-products-sept2014/$FILE/EY-ifrs-developments-retail-and-consumer-
products-sept2014.pdf [Accessed 10 Sep. 2017].
www.ifrs.com. (2017). International Financial Reporting Standards (IFRS). [online]
Available at: http://www.ifrs.com/pdf/ifrsupdate_v8.pdf [Accessed 10 Sep. 2017].
Contributor, C. (2017). Benefits of Convergence. [online] CSO Online. Available at:
https://www.csoonline.com/article/2117377/data-protection/benefits-of-convergence.html
[Accessed 13 Sep. 2017].
Digital Marketing Institute. (2017). How to benefit from the convergence of traditional and
digital marketing. [online] Available at: https://digitalmarketinginstitute.com/blog/how-to-
benefit-from-the-convergence-of-traditional-and-digital-marketing [Accessed 13 Sep. 2017].
L, C. (2017). The benefits of convergence. - PubMed - NCBI. [online] Ncbi.nlm.nih.gov.
Available at: https://www.ncbi.nlm.nih.gov/pubmed/26809570 [Accessed 13 Sep. 2017].

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Matt Zanderigo, P. (2017). The benefits of converged network and application performance
management. [online] Network World. Available at:
https://www.networkworld.com/article/2452655/application-performance-management/the-
benefits-of-converged-network-and-application-performance.html [Accessed 13 Sep. 2017].
www.researchgate.net. (2017). The benefits of convergence. [online] Available at:
https://www.researchgate.net/publication/291948207_The_benefits_of_convergence
[Accessed 13 Sep. 2017].
www.ey.com. (2017). Changes in the business operations. [online] Available at:
http://www.ey.com/Publication/vwLUAssets/IFRS_Update_31_March_2017/$FILE/CTools-
Update-March%202017.pdf [Accessed 13 Sep. 2017].