arguments for and against accounting standards

This paper outlines the arguments for a common set of accounting standards and the forces that have promoted adoption of International Financial Reporting Standards (IFRS). The IASB has adopted a principles-based approach to develop a set of accounting standards that constitute the "highest common denominator" of financial reporting. Therefore, the sum associating to the old, superseded, debt was no longer relevant.". The last in, first out (LIFO) method of inventory valuation is prohibited under International Financial Reporting Standards (IFRS), though it is permitted in the United States, which uses . Examine the benefits and risks of your chosen position. But in answer to the A2A, here is what I see as the. The International Accounting Standards Committee (IASC) has taken the lead in the standardization of these models. 5. 15. Another disadvantage of IFRS is the cost associated with the transition from GAAP-based standards and accounting information systems to IFRS-based accounting information systems. Lessee financial reporting will be significantly affected by a new IFRS lease accounting standard that will be effective from 1 January 2019. Mon 11 Mar 2013 13.40 EDT. One of the arguments against universal accounting standards is the uniqueness of every country. Considering the differences among countries in terms of socio-politico-economic systems, it would be almost impossible to arrive at a set of accounting standards that would satisfy all of the parties involved. Harmonization versus Standardization Globalization also carries the . It would offer more flexibility in the accounting practices. Con 3: Labor and environmental standards may slip. 1.Evaluate and explain the following claim: Unless there is consistency. The manner in which the accounting principles have been applied for formulating the standards. Academic Fellow - Research, IFRS Foundation. They want formal authority to pick-and-choose which pieces of new IFRS rules to adopt. As stated earlier, accounting for dialogue of debt is non included in FRS 4. The Arguments For Regulation Accounting Essay. (b) Prior to convergence with international accounting standards, Australian companies were required to amortise goodwill on a straight line basis over a period of no more than 20 years. Principles-Based Standards in Accounting: Arguments Against Their Advantages Over Rules-Based Standards Gary P. Schneider, William S. Perlroth Professor of Accounting, Quinnipiac University These standards are like the rules for accounting in any country. globally in the implementation of accounting standards and subsequent enforcement mechanisms, we cannot expect accounting practices to be uniform throughout the world, despite the initiatives of the IASB, which encourage different nations to adopt IFRSs. INTERNATIONAL ACCOUNTING HARMONIZATION Preliminary "Harmonization" is a process for improving the compatibility (suitability) accounting practices by setting limits on how large-prkatik practices may vary. First, we consider significant arguments on whether accounting and financial reporting should be regulated through accounting standards. . Widespread use of IFRS since 2005 provides an opportunity for empirical investigation of the benefits of IFRS. 3. On July 13, the SEC published a staff paper written with the aim of providing the commission Below are arguments for and against a principles-based accounting system. Examine the benefits and risks of your chosen position. IFRS has been adopted by more than 12,000 companies in over 100 nations and is becoming the global standard for the preparation of financial statements of public companies throughout the world. Standards help in fostering transparency in the financial statements which can be. What Are The Arguments For And Against Regulations Accounting Essay. The goal is to achieve some level of comparability in the way financial statements are prepared and presented. If a U.S. company outsources to a country with lower wages, more . . (12 marks)b . Unpicking this complexity involved studying the minutiae of national accounting standards, because even a small difference in requirements could have a major impact on a company's reported financial performance and . They are wanting to go from a yes/no approach to accepting IFRS rules . The argument against such a progress is winded up as follows . B. Because the ASB is composed of professional accountants, they may be unfamiliar with the user needs. 143. Some critics of outsourcing say that it leads to a general slippage in the labor and environmental standards that apply to the goods and services Americans consume. Ann Tarca, Professor of Accounting at the University of Western Australia and Academic Research Fellow at the . Accounting questions and answers. The following is the arguments against the lack of comparability and consistency of IFRS: Due to the strong national identity of IFRS reports, as the main effects of IFRS has been on how companies recognize, measure and disclose items. Accepted accounting standards, or GAAP, provide a valuable framework for business operations and reporting, but they do have a few modest disadvantages as well. Secondly, arguments against convergence indicate that it will be cumbersome and time consuming to convince these countries into adopting new accounting standards which they are not familiar with (Leuz & Verrecchia 2000). What Are The Arguments For And Against Regulations Accounting Essay. It consists of 15 members from nine countries, including the United States. Factual evidence must be accurate, relevant, and complete. In the repercussion of the Asian Financial Crisis of 1997 and the corporate accounting scandals such as Enron and WorldCom in the U.S., regulators and standard setters have requested for improved corporate transparency and presented significant changes to accounting standards and regulations. . necessity of accounting regulations.Some people have many reasons favouring accounting regulations such as the belief that accounting conventions are needed in order to allocate and control the economic outcomes of resource allocation and information stipulation in the market. These incidents include instability in finances, desire to maintain efficient markets, maintaining fair competition, and attempting to protect consumers . Charles Lee, professor of accounting at Stanford Graduate School of Business, begs to disagree. This paper outlines the arguments for a common set of accounting standards and the forces that have promoted adoption of International Financial Reporting Standards (IFRS). 1 Explain the arguments that support the development of global accounting standards 2 Explain the arguments against the development of global accounting standards 3 Discuss the relative merits of harmonization and standardization as ways of achieving. Although there appears to be strong reinforcement for the development of the conceptual framework, estimation is not undisputed (Jackling, 2010). Today, over 100 countries including Canada, India, and Japan have adopted these standards for financial reporting. A new argument raised by Prof. Leuz in favor of full adoption of IFRS is that failure to do so would surrender the US lead in furthering global financial regulation in other areas. This paper aims at examining the case for and against the International Financial Reporting Standards adoption as the global accounting standards. This is a critique that's often cited by opponents of NAFTA. The paper "Arguments For and Against the International Financial Reporting Standards" is a wonderful example of a research paper on finance and accounting. It might even create new opportunities for companies to . However, although these costs may be high, they are short . Identify, analyze and evaluate the arguments for and against the harmonization of international accounting standards. With respect to accounting standards in particular, the Financial Stability Forum (2009) and the U.S. Treasury (2009) strongly recommend that both the FASB and IASB re-evaluate fair value accounting, accounting for loan losses, and hedge accounting, among others issues. "The ASB argues that the dialogue was a dealing that efficaciously resulted in the original loan's being replaced by a new loan giving rise to raise payments. However‚ others have arguments against the use of accounting regulations‚ such as regulation leading to oversupply . ADVERTISEMENTS: 3. Sarbanes-Oxley required the SEC to conduct a study on the adoption of a principles-based accounting system by United States SEC companies. (5 marks) (b) Arguments concerning systematic amortisation: The cost of the application is too high for multinational companies as it comprises training costs, changing the whole internal systems so that it is compatible with the new standard (De George . So we shall continue with the arguments for and against. Arguments For and Against Financial Regulations. countervailing regulatory response now. accounting standards. The framework of accounting offers all the basics of rationale and objectives. We previously examined the basic idea behind accounting standards. The United States uses the U.S. GAAP, and United Kingdom uses the U.K. GAAP. . The paper investigates two research questions. However, there has been an argument about the lack of efficiency and comparability of IFRS. One obstacle would be getting countries to agree to give up control of their own accounting standards. Abstract . Identify, analyze and evaluate the arguments for and against the harmonization of international accounting standards. Pros and cons of the new IFRS lease accounting standard. The convergence of accounting standards refers to the goal of establishing a single set of accounting standards that will be used internationally. Accounting; Accounting questions and answers; Create an argument for or against a single set of international accounting standards related to lease accounting based on the global market and cross border leases of assets. Assume you are the partner in an accounting firm hired to perform the audit on a fortune 1000 company. Arguments against accounting standards convergence are (a) the unwillingness of the different nations involved in the process to collaborate based on different cultures, ethics, standards, beliefs . Rejecting IFRS. The mission to create a single set of global financial-reporting standards received two blows in recent days as the International Accounting Standards Board engaged in tussles with the Securities and Exchange Commission and the Financial Accounting Standards Board. Ralph Thurm. LO2: Identify the arguments for and against international convergence of financial . Another complication is requiring all countries to follow the same accounting principles means that one organization or governing authority will have to enforce these standards. 6. It would actually inject more uncertainty into financial reporting and make life harder for shareholders. Congress passed the Sarbanes-Oxley Act. This research paper will determine the arguments for and against rules-based and principles-based accounting standards from previous literature and ascertain current perceptions of the debate on a . It is funded by contributions from major accounting firms, private financial institutions . For example the chairman of the IASB has described the definition of prudence in the IASB's former framework as 'sheer common sense'. When international harmonization occurs, the . would deal a major blow to the prospect of unified global accounting standards. 2. Accounting Standards. Simply stated, in weak economic conditions, FV accounting leads to generating pessimistic assumptions that precipitate significant decrease in asset values and significant lowering of earnings because of recognizing the unrealized losses in the income statement. The argument presented by the opponents of fair value accounting is straightforward. Applying national accounting standards meant amounts reported in financial statements might be calculated on a different basis. Create an argument for or against a single set of international accounting standards related to lease accounting based on the global market and cross border leases of assets. Arguments against the IFRS standard Despite being a game-changer in the accounting sector, IFRS also came with criticism, especially from the opponents. The Arguments For and Against a Codified Constitution A constitution is a set of rules that seek to establish the duties, powers and functions of the various institutions of government, regulate the relationships between them, and define the relationship between the state and the individual. There are arguments against different reporting . Some argue that the rules based US GAAP approach is better while others argue that the principles based IFRS is better. They do so by standardizing accounting policies and principles of a nation/ economy. However, harmonised accounting standards are not without its criticisms. Need for Harmonisation as a Reason for International Differences in Financial Reporting. Different countries are guided by various accounting standards based on the needs of the nations. The proposed draft of the accounting standards should include the following basic points: 1. Arguments for and against IFRS: Advantages and Disadvantages of IFRS Disadvantages Conclusion In addition to these added costs, it has been found that the audit fees of public accounting firms increase after the transition to IFRS. We know that Accounting Standards Board is the main accounting standard setter. A furious debate has started over whether the burden of sustainability reporting is in danger of reaching unbearable proportions. This occurred in New Zealand, which experienced The IASB is an independent accounting standard-setting body, based in London. History is filled with examples where crisis and scandals paved the way for regulatory interventions in the financial markets. Extensive research has been carried out, and many experts have contributed to making the standards excellent. Harmonization is aimed at reducing differences in financial reporting processes around the world. Answer (1 of 5): This is a question that I have never thought too deeply about because given all the facts about the advantages and disadvantages of regulation in accounting, I have always felt that the advantages far outweigh the disadvantages. Arguments against Convergence The International Accounting Standards Board (IASB) was formed in an attempt to bring uniform accounting standards within international countries through its issuing of the International Financial Reporting Standards (IFRS). This comes ahead of . Moral standards must be consistent. the standards are perhaps more widely agreed upon. A statement of concepts and fundamental accounting principles relating to the standard. Detailed Analysis of IFRS. These preconceived notions impact on the willingness to adopt harmonization and convergence. But which approach, principles or rules, do you think is best? 5. Ensure that you justify your evaluation(s). This is because it also has its downfalls that downgrade conceptual framework. In so doing draw upon references from relevant theories and propositions and, where appropriate, illuminate your analysis and evaluation(s) by using examples and illustrations. Arguments Against the Development of Conceptual Framework. That means the goal of each standard in IFRS is to reach a reasonable valuation, and there can be several ways to reach that outcome. Hire a Professional Essay & Assignment Writer for completing your Academic Assessments. With the accounting standards, financial reports are expected to present information that is relevant and credible. In accounting, for every basis, identification and measurement of the elements of financial statement and the impact of the circumstances and financial status and work results should be defined in a form of standards. Definition of the terms used in the standards. Arguments against accounting standards convergence are (a) the unwillingness of the different nations involved in the process to collaborate based on different cultures, ethics, standards, beliefs . This approach is in sharp contrast to the approach adopted by the IASC in its early years. Convergence in some form has been taking place for several decades, and efforts today include projects that aim to reduce the differences between accounting standards. Accounting Standards are the statements of code of practice of the regulatory accounting bodies that are to be observed in the preparation and presentation of financial statements. a) Do you agree with a 'one size fits all' approach to financial reporting, that is, that all countries should adopt the same accounting standards and conceptual framework?Required:Explain your answer by discussing the arguments in favour of and against the harmonisationof accounting standards. Arguments in favor of accounting standards are as follows: 1. Harmonization of standards will be free of conflicts of logic and can improve the comparability (comparability) of financial information from different countries. The International Accounting Standards Board (IASB) is the major entity proposing international standards of accounting. The major argument is harmonization and uniformity in financial reporting. Argument against the case an accounting standard to regulate the way in which complex financial instruments are reported in the financial statements of quoted companies essaysIn this essay, I would like to start with a brief explanation about the accounting regulation and standards set for various t The Generally Accepted Accounting Principles is comprised of a large group of individual accounting standards. Moral reasoning must be logical. Originally formed in 1973 as the International Accounting Standards Committee (IASC) and renamed the International Accounting Standards Board in 2001, the IASB is an independent agency that develops accounting standards known . accounting practices internationally, thereby increasing the credibility of financial information. Basically an announcement of accounting standards or rules issued by the official authorities in the particular environment of general guidelines that can be used by management to produce financial statements. Challenges of Harmonization of Accounting System. 1 Answer to state the arguments for and against having accounting standards as a basis for preparing financial statements. Convergence is driven by several factors, including the belief that having a . Required: Identify and discuss clearly what the arguments against a uniform accounting standard are. This paper outlines the arguments for a common set of accounting standards and the forces that have promoted adoption of International Financial Reporting Standards (IFRS). ANSWER: Arguments favoring regulation are that intervention in the form of mandatory reporting requirements are necessary to ensure that the real demand for accounting information is met and to provide the best standards from the societal point of view. Mentioned in an earlier post that the EU is having second thoughts about IFRS. In the repercussion of the Asian Financial Crisis of 1997 and the corporate accounting scandals such as Enron and WorldCom in the U.S., regulators and standard setters have requested for improved corporate transparency and presented significant changes to accounting standards and regulations. Changing accounting standards to get a bigger explanation may attract more internal or corporate fraud cases. The IFRS are accounting standards, rules and principles that were introduced by an independent organization in the United Kingdom, known as the International Accountants Standards Board.The institution puts forward that the standards would better serve public companies worldwide than the local standards in the country due to the aspect of comparability . The IASB began operations in 2001 when it succeeded the International Accounting Standards Committee. So the transactions of all companies will be recorded in a similar manner if they follow . A. The framework provides a standard against which various core and dedicated accounting practices can be tested in an objective manner. Mandated disclosures are cheap to provide and by their nature will devalue the worth of the information being provided. Widespread use of IFRS since 2005 provides an opportunity for empirical investigation of the benefits of IFRS. Introduction. There are many arguments against international harmonization of accounting standards. When it comes to accounting standards, there is debate about whether principles or rules are better. There is much political debate about harmonization as well. With over a hundred countries using International Financial Reporting Standards (IFRS), it becomes natural to notice the purple elephant in the room in that a set of different principles serve as guide to accounting in the U.S. and for U.S. companies known as Generally Accepted Accounting Principles (GAAP). See full answer below. In relation to this argument, some point out that as a result of convergence, developing countries would be able to adopt a ready-made set of high-quality standards with minimum cost and effort. (30 marks) Write My Assignment. While it makes bookkeeping more accurate within a business and industry, it can also be expensive and time intensive to maintain. Need for accounting standards While preparing the financial statements, accountants are confronted with the danger of ambiguity, biasness, inexactness and misrepresentation. Accounting Standards (AS) are basic policy documents. By making so many choices of accounting methods available under the standards, the efficiency with which the information is provided will be enhanced. Widespread use of IFRS . Arguments against the regulation of accounting information include: A. This paper outlines the arguments for a common set of accounting standards and the forces that have promoted adoption of International Financial Reporting Standards (IFRS). Ensure that you justify your evaluation(s). Common Core Standards: Arguments For and Against Highlights of the Debate Pros Discussion: The Common Core Standards (CCS) are evidence-based. Their main aim is to ensure transparency, reliability, consistency, and comparability of the financial statements. 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