Impacts of the adoption of IFRS on accounting in US.
As globalization becomes popular in the world, the global accounting standard for the business enterprises which are globally operating should have to be developed. International Financial Reporting Standards, IFRS, would solve this issue for the global businesses to have a clear, accurate and consistent common set of accounting reporting standards. There are more than 100 countries that have adopted the IFRS including the European Union. The convergence of IFRS on accounting in the US would have several impacts from various points of view ranging from the technology system to tax reporting. Computerized accounting systems, accounting professions, audit report preparers, management personnel, business owners, investors, tax authorities, and litigation and regulatory issues are the main concerns of this convergence process.
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This impact would be affected by fair and equitable experts.
Furthermore, financial statement presentation has a huge impact on preparers such as accounting personnel and auditors. Audit firms must be educated prior to providing training and consulting service to their clients. This factor has an impact on financial statement users such as management, board of directors, internal audit personnel, shareholders, investors and government authorities. The interpretation of the IFRS financial statements is critical to the stakeholders.
In addition, there would be significant business and operational implications that may require excessive time and human resources during the interim transition period. Training and educating is necessary for all businesses. Upgrading the computerized accounting software is also mandatory. These could cost a business a considerable amount of money in the short-run. Multinational corporations would be saving money in the long-run when they cut down from three financial reports to two or one.
Moreover, businesses have to be aware of economic impacts which can financially affect a business in either a positive or negative manner. Businesses may gain economic benefits on overseas markets due to having international accounting standards. This helps growing businesses to extend their market share globally. These changes of accounting reporting standards could also impact litigation and regulatory point of view for taxation purposes.
On top of above mentioned impacts, US businesses have some doubts about adopting the IFRS. Firstly, it is questionable that International Accounting Standards Board (IASB) would become a potentially dangerous monopoly if the US switches to IFRS from US GAAP. Secondly, would the US’s power over accounting diminish? Thirdly, is IASB ready to take charge of a global accounting network? Lastly, US businesses wonder if IASB could maintain the quality and has resources to do so.
In conclusion, implications of the convergence of IFRS on accounting are related to not only just accounting but also other factors.