Advantages and barriers of harmonizing International Financial Reporting Standards throughout the world Essay

The discipline in outside(a) trade and capital flows that has occurred over the previous two decades has increased the desire to harmonise business relationship bills across the globe. The conjure up of inter subject area story harmonization has been extensively discussed. Numerous academics Ali, J M (2005), Adhikari and Tondkar (1992), Saudagaran (1997) argue that adopting International Financial Reporing Standards (IFRS) would bring great well-beings to society, such as comparability of statements betwixt countries, progression and development of capital markets and confabulation and relationships between multinational companies. It has also been debated by some Blake (199O), Nair and Frank (1981), Nobes and Parker (2004 ), Arpan and Radebaugh (1985), Deegan (2005) that with the rewards gained from harmonization make out some barriers frugal imports, nationalism and the lack of professional bodies.One of the to the highest degree valuable features that would come from harmonization would be the comparability of world(prenominal) monetary information. Currently there is great mis arrests about the foreign pecuniary statements, change comparability would remove this issue and it would also eliminate one of the closely significant barriers to the flow of international coronation. Global harmonization would save beat and money that is presently being spent on uniting differing financial information when more than one set of reports is required to comply with the different national laws or practice Blake (1990). It all in allow for also improve the temperament for history standards throughout the world to be raised to the highest possible take aim and to be consistent with local economic, legal and social conditions. Having one international method of history language is beneficial for the worldwide comparison of statements and understandability.Unifying explanation standards would also help the development and expansion of capital ma rkets. Ali, J M (2005). In the last two decades the growth in capital markets has been precise dramatic. This increase has brought about a number of issues. One concern is the variant in accounting disclosure standards and practices worldwide, which is concerning for a variety of different groups Adhikari and Tondkar (1992). IFRS would hold foreign investors, financial analysts and foreign lenders to have a greaterunderstanding of the financial statements of different international companies and they would be able to compare the investment opportunities which will help them to make the right investment decision. The group that would benefit the most out of the harmonisation of accounting standards would be the Multi-national companies (MNCs) as the communication of financial information within the groups would become easier. With the harmonization of reporting standards it would be easier for MNCs to fulfil the disclosure requirement for stock exchanges around the world. galore (postnominal) of the new foreign investment by MNCs is taking place in developing countries and at the same time that there has been a lancinate decline in new investments in industrialized nations Saudagaran (1997).This means that delinquent to the remarkable differences between financial reporting MNCs have to create many consolidated financial statements in regards to the regulations for each separate country. To do this it takes a great deal of time and resources, this problem would be eliminated by the bridal of IFRS. A subject of debate is whether the accounting regulators take the issue of economic consequences into account when deciding on whether to adopt the IFRS. Many companies do non take on the change as bringing change into their accounting standards will raise costs. This resistance may occur with the harmonization of accounting standards Blake (1990). Nair and Frank (1981) stated national accounting group would lobby in this fashion in aim to minimize the costs associated with changing to a new standard, or to avoid stigma of noncompliance if it chooses instead to miss the new international standard. It is also discussed that accountants may lose their believability if they are to answer to the economic consequences pressures whilst it is also discussed that it is a vital outcome if accounting regulations are to command general support.Blake (1990) tenders evidence of how accounting standard setters were influenced by economic consequence issues in different countries. Economic consequence issues may cause diversity of accounting practices because they are a resolving power of the national cultural and regulatory framework. One of the barriers for harmonization may be nationalism. Nobes and Parker (2004) advocate that nationalism will cause a refusal to accept accounting standards that is to be developed by other countries. Each country follows the article of faith that they have in place the better system and that other countries ac countingstandards are of an inferior nature Arpan and Radebaugh (1985). Some countries that have faults and inadequacies within their standards will chose not to adopt the IFRSs as they can benefit from these ineffiecies. An example is presumption by Carlson (1997) who acknowledges that governments may view attempts by the IASC to alter national accounting rules as infringements upon national sovereignty. Developing nations and those which have been colonies of imperial powers are especially sensitive to intrusions. Wallace (1990) identifies three reasons in favour of survival of the IASC/IASB, including the increasing internationalization of business and finance, the composite nature of its standards, and the absence of rival in the development of global accounting standards. Another political obstacle that may arise, which is discussed by Nobes and Parker (2004) is that there are several countries that are not in the movement of strong practiced accounting bodies.The IASB wanted to work through national accountancy bodies but this is an issue as they are not all countries have effective bodies. The IOSCO came forth with the suggestion of the adoption of IASB standards as an satisfactory basis for the preparation of financial statements to member exchanges throughout the world. This means that a company looking for listing in another country does not have to adjust its reports to fulfil the specific national requirements if the reports are already in agreement with IASB standards Deegan (2005). The need for the harmonization of IFRS is definitely evident. As discussed originally there are a great number of benefits that would arise from this progression. To provide a professional, developing and strong accounting environment it would be necessary. disdain the benefits there are a number of barriers and hurdles that need to be overcome in order to bring about the harmonization of international accounting standards. In order to ensure the uniform applicatio n of accounting standards across cultural and political boundaries IASB needs to ensure that there are strong audit practices and fair values applied in order to bring about the integrity of the standards.