Comparison between Accounting Standards

Comparison between Accounting Standards

Introduction

The globalization of accounting standards have made it easier for all the organizations as they now have one medium of comparison for organizations from any part of the world. On the basis of the above information collected from several secondary sources it has been examined that globalization of accounting standards has a positive impact on the overall performance of the organizations. The impact of accounting standards that is IAS/IFRS and GAAP/FASB also led to betterment in the financial reporting of the information essential for the users such as investors, shareholders, creditors and etc. Furthermore, the qualitative data also provided information that internationalization of accounting standards has made it easier for the shareholders to analyse the performance of the organization globally. Therefore, the overall impact of accounting standards is positive and it enhances the profitability of the organizations.

This report is aimed at examining the advantages and disadvantages associated with the usage of such accounting standards; later a detailed comparison between such standards is also presented.

Discussion

Advantages & Disadvantages Associated with the Underlying Accounting Standards

It is important to discuss the advantages and disadvantages associated with the underlying accounting standards. Understanding of such advantages and disadvantages enables accounting professionals in making sound decisions regarding the selection of the particular accounting standard.

Advantages of IFRS

Some of the advantages organizations are able to extract from implementing IFRS accounting standards are as following: firstly it is an accurate, comprehensive and a timely provider of information in the form of financial statements. These standards are followed by organizations in all the parts of the world and thus provide a more informed valuation of firm's financial statement in the equity markets. Second, benefit of IFRS is used for improving the quality of firm's financial reporting abilities and thus enables them in reducing the risk associated with better informed professionals. Third advantage found through secondary and primary sources used by for the present study is that it eliminates all the differences internationally by standardizing the financial reporting formats. Therefore, international comparison can be conducted among the financials of these organizations. Another advantage of IFRS is gathering of standardized database for users of financial information. A major advantage of IFRS is that it facilitates in cross border acquisition and mergers which will reward the investors as there takeover premiums will increase.

Disadvantages of IFRS

However, apart from these advantages analysed there are several disadvantages associated with the financial reporting according to IFRS accounting standard. These are as following; firstly the implementation cost is much higher than GAAP or IAS standards previously followed by the organizations. Thus, IFRS increases the financial burden of the firms as they have to fulfil accounting standards according to the requirements of the international community and the stakeholders. Second disadvantage of IFRS especially for the firms in US and UK is that they have to convert their financial records made in the past and present so that a better evaluation of the organization can be done in the ...