Article Review on "US Adoption of IFRS"

Article Review 5 pages (1850 words) Sources: 3

[EXCERPT] . . . .

U.S. Adoption of IFRS

The formation of a single set of high quality global accounting ideals is a matter of increasing position as the contributors in the ever gradually assimilated world capital markets mandate comparability and clearness of financial reporting international. Worldwide Financial Reporting Standards (IFRS) is the foundation of accounting morals that are generally matured by the International Accounting Standards Board (IASB) that is turning into the worldwide criterion for the provision of the public company financial declarations. More than 12,000 public businesses in over 100 nations have adopted IFRS, and that includes the list of companies in the European Union. Other nations comprise of Canada and India, and they both are expected to changeover to IFRS sometime in 2011 (Anderson a & Nkansah, 2011). In a lot of other places, private organizations also use IFRS for monetary documenting. With that said, this essay will provide a thorough summary of opinions from Anderson a & Nkansah article "Should U.S. Adopt IFRS?"

It is obvious adopting the IFRS would be much easier to do compare to let us say forty or fifty years ago? Why? Well, because today, even though political limitations that separate countries still are in existence, it is obvious that the U.S. can handle it especially since the global market is more consistent and integrated than ever before. According to Anderson a & Nkansah (2011) in their article "Should U.S. Adopt IFRS?" It is a fact that the physical boundaries are becoming more and more economically absent in a lot of respects since the virtual competences and trade liberalization allowing the movement of capital and services and goods. Further, the article makes the point regarding the fact that those who are investors are capable to move capital throughout limitations to markets where they can anticipate better returns, running to the connections of the world's capital marketplaces.

To bring more of a support to Anderson a & Nkansah argument, Sun (2010) according to " How Would the Mandatory Adoption of IFRS Affect the Earnungs Quality of U.S. Firms in the U.S.," tells us that it is unquestionably too early for anyone to say that the IFRS would not be successful in our country. He goes on to explain that fact that it is difficult at the moment to make a prediction on the impact of strategy changes, predominantly when there is no example around to make an assumption. Anderson a & Nkansah (2011) make the point that United States companies are at present not permitted to help IFRS, so it is not conceivable to recognize an adjustment of U.S. companies that have swapped from United States GAAP to IFRS. The article goes on to state that even though such corporations could be recognized, the consequence on businesses that adopt IFRS on their own will of course differ from the outcome on companies that accept IFRS mandatorily. As a result, the article summarizes that we emphasize on foreign organizations that cross-list in the United States and that come from nations where the obligatory adoption of IFRS was necessitated at some point through our example era. Anderson a & Nkansah (2011) article supports a lot of people's concerns on rather or not IFRS adoption is needed by mentioning that while we use different companies as replacements for U.S. businesses, we are acknowledging the fact that the cross-listed companies are not perfect substitutes for United States organizations.

The article continues to state the fact that the United States should adopt the IFRS because it will free up other countries so that they can be more productive. Nations smuggle goods that can be manufactured more professionally in other places, in that way dropping customer estimates and allowing them to focus on what they can professionally create for native and export requirements. Many believe in the article that the IFRS would benefit because of the globalization of the market. Sun (2010) support this by mentioning that the international market capitalization not just went up meaningfully between the years of 2001 and 2009, but also fundamentally enthused capital consciousness from the progressive markets to emerging markets. Anderson a & Nkansah (2011) believe that globalization has transported noteworthy social advantages as well. In 1990, the proportion of individuals living on fewer than $1.25 each day in Asia Pacific and East Asia was 54.7 percentages; by 2005, the amount was now declining to 16.8%, a 69 percentage began dropping in the poverty stage. Sun (2010) has some similar has some parallel concerns by stating that more than a few other districts saw substantial developments during this same era. Globalization has transported significant economic and societal reimbursements - a tendency improbable to contrary.

To give the article more support concerning should U.S. adopt IFRS Khurana (2010) makes the point that that U.S. home bias is lower for countries that mandate IFRS adoption. In his article he made an investigation prove the fact mandatory adoption of International Financial Reporting Standards (IFRS) at the nation's level decreases U.S. investors' bias which would be a good thing. A ordinary clarification for the U.S. home bias is that U.S. stockholders are informationally deprived when providing in foreign marketplaces with poor material revelation. An informational drawback can result from when it is further costly for U.S. depositors, associated to domestic stockholders, to attain pertinent material about companies in non-U.S. marketplaces when accounting criterions fluctuate.

The article goes on to summarize the point that it is very important to find out the alterations among accounting values that are through borders are repeatedly mentioned as a significant issue that is affecting the data dispensation prices of U.S. stockholders who wish to differentiate globally. For instance, in Khurana (2010) article "Mandatory IFRS Adoption and the U.S. Home Bias," he makes the point that U.S. shareholders have to discover numerous sets of accounting criterions in order to contrast corporations in diverse countries. Nevertheless, nations that have opted into a "network" of nations with a communal set of accounting morals can deliver comparability assistances to consumers of financial reports (Hail et al. 2009).

In bringing some clarification to Anderson a & Nkansah point of having IFRS in the United States, a recent study that is utilizing yearly reports that had been released under instructed IFRS adoptions has started to report that IFRS authorized associations through companies. For instance, Barth (2011) postulate indication that IFRS businesses have better accounting system and worth - importance comparability with United States companies when IFRS businesses pertain IFRS than when they requested non-U.S. internal morals. Taken together, the inference is that IFRS adoption in a nation can considerably decrease material administering prices, directing to augmented asset by U.S. stockholders and, as a result, lesser U.S. home bias.

However, in the article, it makes some compelling points stating that there are some that have a different view concerning things like the U.S. GAAP Some argue that U.S. GAAP is simply better than IFRS- a debate for which it is impossible to determine a "winner." Frankly, both criterions have their weaknesses and strengths. The foremost fact is not fact that one could better than the other but if IFRS is of adequate excellence to be operated internationally. If that is correct, then the key query is whether, in a globalized market, one monetary describing language that is better than two opposing dialects. That is just saying, is it possible that a U.S. stockholder looking to get involved, say, in the United States or some other place be served better by assessing two financial statements arranged under one accounting dialect or two?

The article goes on to state that without a doubt that this stockholder would be better served by the attainability of an equivalent set of financial statements for these two objects more willingly than dissimilar financial statements prepared under dissimilar opposing accounting dialects. Now, I think that one could make the argument that comparability can be achieved through convergence of the standards in U.S. GAAP and IFRS. The problem is, no one actually knows what convergence means. Is it saying that the Financial Accounting Standards Board and International Accounting Standards Board deliver the "identical" ethics or "similar" criterions? If it signifies the identical criteria, the vocation has to recognize that after approximately 10 years of work on the Communication of Perception, there has yet to be the same typical delivered.

With that said, in the article, supporting this data acquisition cost hypothesis that concerns accepting the IFRS, Karolyi and Stulz (2003) make the point that the home bias marvel is unpredictable with the supposition that depositors have the same evidence across countries. In addition, more than a few empirical studies in accounting display that understanding with accounting criterions subjects for portfolio distributions. Bradshaw et al. (2004) made the discovery that U.S. institutional ownership is developed for foreign companies that use accounting values earlier in method to U.S. GAAP. They ascribe this in part to the understanding with U.S. GAAP to U.S. stakeholders, which, however, drops the prices of studying foreign corporations' financial statistics.… READ MORE

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