International Financial Reporting Standards: Investor's Viewpoint

This report examines the pros and cons of International Financial Reporting Standards (IFRS) from an investor's perspective. It discusses the implications of IFRS, focusing on the impact of fair value accounting and the challenges of uniform implementation across different countries. The report highlights the importance of understanding local political and economic factors in financial reporting, and the potential for inconsistencies in IFRS application. It explores the advantages and disadvantages of IFRS adoption for investors, considering the need for uniform reporting rules and the potential for subjective judgments by managers and auditors. The report emphasizes the importance of understanding the incentives of preparers and managers in financial reporting, and the potential for differences in financial reporting quality. It concludes by discussing the long-run implications of global politics and the role of the IASB in shaping international accounting standards.

Running head: IFRS-PROS AND CONS FOR INVESTORS
International Financial Reporting Standards (IFRS): Pros and Cons for Investors
Name of the Student:
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IFRS-PROS AND CONS FOR INVESTORS
Table of Contents
Introduction................................................................................................................................2
Focusing on major implications of International accounting from their selected paper............2
Conceptualizing and focusing contribution on how selected topic align with International
accounting topic.........................................................................................................................4
Conclusion..................................................................................................................................6
Reference List............................................................................................................................7

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IFRS-PROS AND CONS FOR INVESTORS
Introduction
The selected paper for this study explain about the pros and cons for investors in
regard to International Financial Reporting Standards (Utama, Farahmita and Anggraita
2016). This paper was published on September 2005 and is based on the PD Leake Lecture. It
can be seen that accounting had been driven through economic as well as political forces. In
this study, pros and cons of IFRS are mentioned and this is somewhat conjectural by nature.
By explaining advantages of IFRS, it can be considered that extraordinary success had been
achieved in developing a comprehensive set of high quality International Financial Reporting
Standards that include almost 100 countries who shows interest in adopting them and in
obtaining convergence in standards with significant non-adopters. By explaining the
disadvantages of IFRS, it can be considered that there are several issues linked with the
current fascination of the IASB as well as FASB standards with fair value accounting. By
that, it is understood that are substantial differences noted among the countries who are
engaged in implementation of IFRS that is now at risk as concealed by a veneer of
uniformity. Therefore, it can be seen that uniform standards should be implemented as it will
help in producing uniform financial reporting that seems quite immature (Trajkovska,
Temjanovski and Koleva 2016).
Focusing on major implications of International accounting from their selected paper
International Financial Reporting Standards is one of the standard that had become
forefront on the immediate agenda as it had started its commencement from 2005. It is from
this time when listed companies in Europe Union countries showed interest in having this
report based on consolidated financial statements as prepared according to International
Financial Reporting Standards (Persons 2014). In addition to that, most of the companies are
involving for the release of their first full-year IFRS compliant with the financial statements.

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IFRS-PROS AND CONS FOR INVESTORS
It is the investors who are involved in looking at the interim reports based on IFRS but not
yet understood the full gamut if year-end adjustments where IFRS may trigger in the near
future. Furthermore, there are several pros and cons of IFRS from the point of view of the
investors and this had become matter of conjecture.
It is now important to understand the fact that most of the markets as well as most
politics are mostly local by nature. There are several dimensions where the world can be seen
more of local as compared to local that takes into account extent as well as nature of
government by involving the economy. In addition to that, politics of government gets
involves in conducting financial reporting activities such as political influencer of managers
as well as Business Corporations and banks at the same time. It even include legal systems
such as common versus code law as well as several other shareholder litigation rules. One of
the implication is securities regulation as well as regulatory bodies (Marra 2016). It had
become important to understand the depth of financial markets as well as financial market
structure such as closeness of relationship between bank and client companies. It is further
important to understand the roles of the press as it help at the time of conducting financial
analysis as well as rating of agencies at the same time. It even include considering size of the
corporate sector as well as structure of corporate governance such as relative roles of labour,
capital management activities. The other implication is to know the extent of private versus
public ownership of Business Corporation (Novotny-Farkas 2016).
These implication as listed above provide some information to the extent to which
financial reporting takes place in a local and not global content. With the evolution of
globalization, it can be seen that irrational activities took place after considering economic
and political concern. In that way, the implication are being treated as one of the primary
driving forces behind the majority of actual accounting practices that are likely to remain
domestic in nature for the near future (Kaya and Koch 2015).

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IFRS-PROS AND CONS FOR INVESTORS
Conceptualizing and focusing contribution on how selected topic align with
International accounting topic
There are several effect of local political and economic factors that are laid down on
International Financial Reporting Standards as it gets aligned with the International
accounting aspects (Guillaume and Pierre 2016). There are several political and economic
factors on IFRS that took place at the level of the national standard adoption decision-making
process. In addition to that, the concept had took place to a minor degree when European
Union had carved out from IAS 39 in the application of fair value accounting for the interest
rate hedging activities. Furthermore, the European version of IAS 39 had mainly emerged in
response to significantly by enduring political pressure from the France Government to which
they have responded to pressure from domestic banks as it concerns for bringing volatility in
balance sheet components.
There are yet another level to which the local political as well as economic factors had
been involved as it visibly influences adoption of IFRS from the latitude IFRS for firms who
aims at selecting from the alternative accounting methods. Therefore, some of the local
factors makes it unlikely possible where the discretion can be exercised uniformly in and
across countries and across firms within countries (Gorgieva-Trajkovska, Temjanovski and
Koleva 2016).
However, effect of local politics as well as local market realities on IFRS had shown
little visibility as compared to prolonged political debate that took place on IAS 39. It is
believed that primary effect of local political as well as market factors will lie under the
surface where after implementing, there are factors that are bound to be substantially
inconsistent in and across nations (García et al. 2017).

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IFRS-PROS AND CONS FOR INVESTORS
It is important to evaluate whether implementation should be of equal standard in all
the 100 countries who had declared adoption of IFRS in their operations. The list of such
adopters ranges from countries who had already with developed accounting as well as
auditing profession as evaluated under capital markets in Australia (Gafa, Sri and Halim
2015). In addition to that, even after European Union, it is necessary to evaluate whether
implementation of IFRS can be treated equally in all the countries. It is known to all that
uniform economic rules cannot be implemented evenly because some of the countries may
take notorious standouts. This is the reason why there is difference in the financial reporting
rules.
To explain in detail, accounting accruals normally need at least some element of
subjective judgement as well as it cannot be get influenced by the incentives of the managers
and auditors in that case. By considering two standard such as IAS 36 and IAS 38, it can be
commented that these two need periodic review of long-term tangible as well as intangible
assets for probable impairment to fair value (den Besten et al. 2015).
There was a drift that was present towards treatment of fair value accounting in IFRS
as it will eventually lead accelerate the extent to which implementation of IFRS depends
upon the judgement of managers and auditors. These factors are subject to get influenced by
local political as well as economic factors. It can be seen that there is clear majority of IFRS
adopting countries who are interested in deep securities as well as participation in currency
markets. After implementation of IFRS fair value accounting standards, it can be seen that
most of the countries will start facing problems with illiquidity, as well as wide spared and
subjectivity in marking the model estimates of fair value (Chawla, Forest and Aguais 2016).
In most of the countries, it is noted that the readily information are required to implement the
asset impairment standards and this had been used by the auditors in that case.

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IFRS-PROS AND CONS FOR INVESTORS
Conclusion
From the above discussion, it is understood that there is a need for uniform reporting
rules in and across the world as it seems to be a great virtual action. Internationally uniform
accounting rules can be treated as leap of faith or can be dealt by a significant body of
academic results. In addition to that, proper emphasis had been given in understanding the
IFRS in fair value accounting as it relates with reporting done in the lesser developed nations.
However, it is noted that the incentives of preparers or managers remains local and aims at
creating differences in financial reporting quality as it tend to be swept under the rug of
uniformity. It becomes important to understand the fact that highest standards is needed to be
adopted by companies to manage the lowest quality regimes as it will attract free use of IFRS
brand name in that case. Uniform international standards will help in reducing the level of
competition among different systems. Therefore, the long-run implication of global politics
can be understood well be that the IASB becomes a body that is representative, polarized,
bureaucratic and politicized.
There were few who had disagreed with the uniformity in accounting rules at every
level-be it industry and country. Some of them have disagreed and is of the opinion that
widening of globalization of markets as well as politics means somewhat narrowing of rule
differences among nations where the treatment is optional degree of uniformity and mostly
not clear as well. Therefore, IFRS adoption can be treated as one of the economic as well as
political experiment that is a leap of faith and only time can say about the advantages and
disadvantages of IFRS to investors.

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IFRS-PROS AND CONS FOR INVESTORS
Reference List
Chawla, G., Forest, L. and Aguais, S., 2016. Some options for evaluating significant
deterioration under IFRS 9. The Journal of Risk Model Validation, 10(3).
den Besten, P.S., Georgakopoulos, G., Vasileiou, K.Z. and Ereiotis, N., 2015. The Impact of
IFRS Adoption on Earnings Quality: A Study Conducted on Foreign Issuers in the United
States. International Business Research, 8(11), p.139.
Gafa, A.N., Sri, S. and Halim, D.P., 2015. The Comparison of Accounting Conservatism
Level Between Before and After the Convergence of IFRS in Indonesia with Earnings and
Accrual Method. In Proceeding: International Conference on Accounting, Business &
Economics, hal. 324 (Vol. 333).
García, M.D.P.R., Alejandro, K.A.C., Sáenz, A.B.M. and Sánchez, H.H.G., 2017. Does an
IFRS adoption increase value relevance and earnings timeliness in Latin America?. Emerging
Markets Review, 30, pp.155-168.
Gorgieva-Trajkovska, O., Temjanovski, R. and Koleva, B., 2016. Fair value accounting–pros
and cons. " Journal of Economics", Faculty of Economics, University Goce Delcev, Stip,
Macedonia, 1(2).
Guillaume, O. and Pierre, D., 2016. The convergence of US GAAP with IFRS: A
comparative analysis of principles-based and rules-based accounting standards. Scholedge
International Journal of Business Policy & Governance ISSN 2394-3351, 3(5), pp.63-72.
Kaya, D. and Koch, M., 2015. Countries’ adoption of the International Financial Reporting
Standard for Small and Medium-sized Entities (IFRS for SMEs)–early empirical
evidence. Accounting and Business Research, 45(1), pp.93-120.

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Marra, A., 2016. The Pros and Cons of Fair Value Accounting in a Globalized Economy: A
Never Ending Debate. Journal of Accounting, Auditing & Finance, 31(4), pp.582-591.
Novotny-Farkas, Z., 2016. The interaction of the IFRS 9 expected loss approach with
supervisory rules and implications for financial stability. Accounting in Europe, 13(2),
pp.197-227.
Persons, O., 2014. A principles-based approach to teaching International Financial Reporting
Standards (IFRS). Journal of Instructional Pedagogies, 13, p.1.
Trajkovska, O.G., Temjanovski, R. and Koleva, B., 2016. FAIR VALUE ACCOUNTING-
PROS AND CONS. Journal of Economics, 1(2).
Utama, S., Farahmita, A. and Anggraita, V., 2016. Economic Consequences of IFRS
Adoption in Indonesia. American Journal of Economics, 6(1), pp.79-85.