Discuss about the Accounting Theory and Contemporary Issue.
International Financial Reporting Standard (IFRS) are considered to be the common international standard of business related affairs so that the enterprises can maintain the accounts and compare over the global limits. IFRS is the one result in expanding the international market for a business which deals in different countries across of the world. (Harris et al. 2013). IFRS is slowing replacing the different accounting national standards to meet standards. IFRS is a non-profit organization for accounting, engaging in expansion and promotion of the International Financial Reporting Standards (IFRS) with the help of International Accounting Standards Board (IASB). The IASB (International Accounting Standards Board) is the autonomous regulation setting body of the IFRS Foundation. All gatherings of the IASB are taken place in the open and webcast (Ifrs.org. 2016).
1.IASB is an association of setting accounting standards which currently has 14 members from all over nine countries and is situated in LONDON. IASB conducts its meeting in public and webcast. Investment of this association is done by major and famous accounting companies, private financial institutions, central and development banks, and other globalized and professional organizations all over the world (Armstrong et al. 2015). Members of the IASB are the one who develops and publishes IFRS. Members of this organization are employed only after accurate technique which consists of advertising vacancies and consulting firms. Hans Hoogervorst is the current chairperson, who was appointed in July 2011. IASB is the subpart of IFRS.. In satisfying its accounting regulation, the IASB goes with the open and opaque procedure of which the distribution of consultative reports, for example, Discussion Papers and Exposure Drafts, for the open remark is a vital segment. The IASB draws in intimately with partners far and wide, including financial specialists, experts, controllers, business pioneers, bookkeeping regulators and the bookkeeping calling. IASB is the formal advisory body. On July 2016 IASB has updated new work plan for IFRS standard published. In July 2002, the European Parliament passed a supervision mentioning that companies who are listed on the European Stock Exchange have to make their consolidated financial statement in correspondence with IFRS since 2005. IFRS adoption was made optional to the unlisted companies countries under the European Union (Chen et al. 2014). Unconsolidated holding companies were allowed for a certain omission in their financial statements in the adoption of IFRS in 2005. The European Union Accounting management wants to adopt IFRS separately. The adoption methods can also be called as ‘ENDORSEMENT.’ (Pige 2015). Until July 2010, IFRS was known to be the International Accounting Standards Committee (IASC) and it had 22 trustees by 2012. When IFRS started to integrate accounting over the European Union, the coordination made the work simple and attractive internationally. Standards made by the IASC (the predecessor of IASB) are still followed under the name of International Accounting Standards (IAS), whereas the regulations given by IASB are known as IFRS. IAS originated between 1973 and 2001, by the Committee of the International Accounting Standards Committee (IASC). On April 1st, 2001, newly made IASB had taken over IASC for making International Accounting Standards. In the first meeting, the new committee acquired the previous IAS and Standing Interpretations Committee Standards (SICs) (Ifrs.org. 2016) .Convergence is compelled by various factors, which includes the comparison of a various aspect of accounts, which will give the flow of global investment and advantage to different stakeholders. Assessment of convergence includes its expense and measures. The objective of server farm joining ought to be to empower IT to share, oversee and ensure information resources all the more deliberately and productively. Convergence also refers to exertion that project goals to increase the particular accounting standard, and decreasing difference among them. At long last, we locate an optimist response to IFRS selection occasions for enterprise with highâ€Âquality previously adopted data, predictable in financial specialists expecting overall merging advantages from IFRS appropriation (Christensen et al. 2015)
To decrease and omit difference among United States Generally Accepted Accounting Principles (US GAAP) and IFRS, Financial Accounting Standards Board (FASB) is running with the International Accounting Standards Boards (IASB). In 2008, the convergence was carried out in 2006 as the memorandum of understanding ( Transient undertakings towards meeting between US GAAP and the IFRS includes revision boards models to better adjust them to the next boards, together issuing new benchmarks. (Ball and Shivakumar 2012) Short-term task towards the union between US GAAP and the IFRS include the change of one of the sheets’ principles to better adjust them to the next board, mutually issuing new measures. After the adoption of IFRS to the European Union had made compulsory, there were many reactions from the country people. The enterprise with lower quality pre-adoption knowledge was more distinct for financial institutions like banks and with higher pre-adoption knowledge irregularity, gave positive reaction and was steady with financial specialists expecting net data quality advantages from IFRS reception (Crawford et al. 2014). The Standard Advice Review Group (SARG) offers its suggestion whether EFRAG’s methods suggestion are equal and impartial. We also discover an increased negative response for enterprises domiciled in code law nations, predictable with financial specialists’ worries over authorization of IFRS in those nations.
2. The United Kingdom is a member state of European Union. United Kingdom companies are listed in an EU or EEA Securities, and since 2005 these exchanges are following IFRSs (Wang 2016) The European Commission (EC) issues a document at a regular interval which contains a set of rules of the IAS regulation by European Union Member State. After the adoption of IFRS to the European Union had made compulsory, there were many reactions from the country people. (Stahlin et al. 2013) The enterprise with lower quality pre-adoption knowledge was more distinct for financial institutions like banks and with higher pre-adoption knowledge irregularity, gave positive reaction and was steady with financial specialists expecting net data quality advantages from IFRS reception (Crawford et al. 2014). The Standard Advice Review Group (SARG) offers its suggestion whether EFRAG’s methods suggestion are equal and impartial. We also discover an increased negative response for enterprises domiciled in code law nations, predictable with financial specialists’ worries over authorization of IFRS in those nations. At long last, we locate an optimist response to IFRS selection occasions for enterprise with highâ€Âquality previously adopted data, predictable in financial specialists expecting overall merging advantages from IFRS appropriation (Christensen et al. 2015). The European IAS regulatory, is not only followed by the 28 members of the EU, but also to the other three members of the European Economic Area (EEA), i.e., Norway, Liechtenstein, and Iceland. The UK auditing board also needs to put IAS regulation in the footnote and compliance with IFRSs as it is acquired by the IASB.
For the periods starting on or after 1 January 2015, three new Financial Reporting Standards i.e., FRS-100, FRS-101, and FRS-102 will be followed, carrying the various new choices for all UK elements and gatherings.
There three more FRSs which is created by Accounting Standards Board (ASB), the forerunner is presently the Accounting Board of FRC) to supplant Old UK GAAP and present an IFRS-based diminished exposure system for specific elements.
Notwithstanding the above three principles, the Financial Reporting Council (FRC) has likewise generated different standard, FRS 103 appropriate to such elements that have protection contracts and applies to FRS 102.
Organizations who work inside particular businesses or areas will likewise apply the necessities of their particular Statement of Recommended Practice (SORP) about the Financial Reporting Standards.
The new Standards can be condensed as takes after:
Conclusion:
From the above study, the conclusion reaches that adoption of IFRS in the European Union has been advantageous with some limitation as well. In the accounting standard, convergence explains the aim of finding a single set of accounting standards that will be used globally. Convergence is the method of doing an agreement with accounting standard issued by various regulatory associations. Convergence aims at producing a common set of accounting standards to improve ability, flexibility and contrasting of financial statements (Wang 2014). After the incorporation of IFRS had a massive development in the economy, though some misleading event had occurred. The inclusion of the IFRS has caused much of the development in UK which has helped in incurring revenue. Growth has occurred regarding the infrastructure as well as the per capita income has increased. The inclusion of IFRS has been an advantageous decision for each and every country taking into consideration all the limitations too.
Reference list:
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Ball, R., Jayaraman, S. and Shivakumar, L., 2012. Audited financial reporting and voluntary disclosure as complements: A test of the confirmation hypothesis. Journal of Accounting and Economics, 53(1), pp.136-166.
Barth, M.E., Landsman, W.R., Lang, M. and Williams, C., 2012. Are IFRS-based and US GAAP-based accounting amounts comparable?. Journal of Accounting and Economics, 54(1), pp.68-93.
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Cheng, M., Dhaliwal, D. and Zhang, Y., 2013. Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting?. Journal of Accounting and Economics, 56(1), pp.1-18.
Christensen, H.B., Lee, E., Walker, M. and Zeng, C., 2015. Incentives or standards: What determines accounting quality changes around IFRS adoption?. European Accounting Review, 24(1), pp.31-61.
Cotter, D., 2012. Advanced financial reporting: A complete guide to IFRS. Financial Times/Prentice Hall.
Crawford, L., Ferguson, J., Helliar, C.V. and Power, D.M., 2014. Control over accounting standards within the European Union: the political controversy surrounding the adoption of IFRS 8. Critical Perspectives on Accounting,25(4), pp.304-318.
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Feng, M., Li, C., McVay, S.E. and Skaife, H., 2014. Does ineffective internal control over financial reporting affect a firm’s operations? Evidence from firms’ inventory management. The Accounting Review, 90(2), pp.529-557.
Harris, P., Stahlin, W., Arnold, L.W. and Kinkela, K., 2013, January. A COMPREHENSIVE CASE STUDY: US GAAP CONVERSION TO IFRS. InGlobal Conference on Business & Finance Proceedings (Vol. 8, No. 1, p. 121). Institute for Business & Finance Research.
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