You are to read the report “ The case for global accounting standards ” by Professor Ann Tarca (UWA) and analyse what the key points are of the report. Then prepare a report either supporting or...

1 The Global Accounting Standards:
The Global Accounting Standards:
Arguments and Evidences

2 The Global Accounting Standards:
Contents
Introduction: .................................................................................................................................................. 3
IFRS Adoption: ............................................................................................................................................. 4
IFRS and market efficiency: ......................................................................................................................... 7
Concerns for IFRS adoption: ........................................................................................................................ 7
Conclusion: ................................................................................................................................................... 8
References: .................................................................................................................................................... 9

3 The Global Accounting Standards: Introduction:
Introduction:
The accounting or the concept of accounting used by a company is highly influenced by the
environment in which it operates and the accounting standard that is followed by the country in
which the company operates. The countries significantly differ in their histories, values, cultures,
and political and economic systems which highly affects the accounting standards, and financial
eporting of the companies in that country. With these differences the financial accounting
standards that are being adopted by different nations vary significantly.
With the increasing globalization and trade across the nations, the need of global accounting
standards has increased immensely. With the adoption of global accounting standards, the world
can improve on its comparability and transparency of the financial information across the globe.
With global standards, the investors can have quality information with which the market can
allocate the funds in the market more effectively, with which the firms can achieve lower cost
capital. With the global accounting standard, the development of national capital markets and the
integration of markets internationally will also improve.
IFRS (International Financial Reporting Standards) is gaining momentum as the global norm or
standard for the financial reporting. These are the standards that have been issued by IASB
(International Accounting Standards Board), which focuses on converging different accounting
standards of different countries as per IFRS.
In this paper, we will discuss various effects of adoption of IFRS as the standard financial
accounting standard.
Since 1975, investors and corporate leaders have been pursuing globalization strategies for
investment and business purposes (Ali, 2005). The business and investment opportunities arising
from the globalization of capital markets, regional and international cooperation among countries
and increased international trade have resulted in new problems for business leaders of which
accounting diversity is one of them (Ali, 2005). Warsame (2006) noted that accounting diversity
on financial analysis due to different Generally Accepted Accounting Practices results in
significant differences in the measurements of liquidity, solvency, indebtedness, and

4 The Global Accounting Standards: IFRS Adoption:
profitability. Consequently, accounting diversity is a major ba
ier in interpreting financial
statements internationally (Warhame, 2006).
The diversity in financial reporting has a problematic impact on capital market participants
worldwide (Das et al., 2009; Hines, 2007). These problems include the need for company leaders
to undertake costly and complicated exercises to reconcile and restate their accounting
statements to be meaningful to the listing requirements of other jurisdictions (Das et al., 2009;
Hines, 2007). Additionally, diversity in accounting and reporting requirements has resulted in
major dilemmas for investors and financial analysts in comparing performance of similar
companies located in different countries (Das et al., 2009; Hines, 2007; Warhame, 2006).
IFRS Adoption:
The development of a set of globally accepted accounting standards formally began in 1973 with
the establishment of the International Accounting Standards Committee (IASC), which aimed to
improve and harmonize financial reporting around the world.
Accounting Standard harmonization has become one of the most important issue across the
globe, the countries are making a strong move in adopting IFRS or converging the same with
their cu
ent standards. The goal of accounting harmonization is to establish a single global set of
standards to facilitate cross-border comparisons of financial data, allowing analysts and other
market participants to better use their cu
ent expertise to analyze firms from other countries.
The main objective behind the same is to enhance the usefulness of the accounting information
which has a strong focus on the relevance and comparability of the financial reports across the
globe. (Alford et al., 1993)
The supporters of global adoption of international accounting standards argues that the adoption
of IFRS will increase the quality of financial reporting and will benefit the investors in analyzing
the financial reports across the globe, whereas the opponents states that the uniform standard
may not be improve the...