International Financial Reporting Standards Essay

1. IntroductionWith the announced acceptation of International Financial Reporting Standards (IFRS) for publicly accountable start 2011 by the Canadians Accounting Standards Board (AcSB), issues close the effect on the usagefulness of monetary statement need serious attention starting time on knowing the similarities and differences between Canadian generally accepted story principles and IFRS.  Some critics obtain argued that IFRS get out  give up too much dependableness in order to achieve relevance, while some others nonplus argued that the increased relevance and liken leave alone promote effectiveness of the monetary statements.  This paper attempts to address virtually of these issues as is seeks to analyze the potential effects of Canada Adoption of IFRS by devising an opinion as to whether the change will allow in to a greater extent(prenominal) or less ratiocination useful information, thus making securities markets both to a greater extent or less efficient.2. Analysis and Discussion2.1 What is IFRS and its prefers if adopted?IFRS is creation promoted by its supporters as a single stack of globally accepted, superior quality report standards (KMPG Canada, 2007), that is adopted by over a deoxycytidine monophosphate countries, including five of the G8 countries (KMPG Canada, 2007).  It appears to puddle gained the support of a number of countries and with announced borrowing in Canada, starting 2011 by AcSB, on that point is good ground to believed about the benefits of the said set of international account statement standards in Canada compared staying on with the subject Canada generally accepted accounting principles.  To cite names of countries, it could be asserted that as early as 2005, publicly listed companies in European Union member countries , Australia, Hong Kong,  and South Africa and maintain used IFRS (KMPG Canada, 2007).  In the absence of these countries plan or indication of locomote to where they came from, with more causal agent and interest it is to know about the improvement from IFRS acceptance in the financial statements of Canadian companies.Given therefore the similarities of the two standards on a lower floor Canadian GAAP and IFRS, there is basis to state that Canada has had considerable comment and influence in the development of IFRS over the years (KMPG Canada, 2007).  Therefore, Canadas decision to join the legion(predicate) countries in adopting IFRS carries with it the intention to benefit enterprises in Canada.  That it would suffer better access to international capital, funding and investment opportunities should not play along as a big surprise.  The realities of samurai bonds or Eurobonds (Hill, 2009) could be asserted to have strong support from the presence of IAS or IFRS in the countries where bonds are floated as companies seek cheaper sources of capital as finding the comparable outside each homo countr y  helps in minimization of cost of capital as an objective (Brigham and Houston, 2002).  The improved information in terms of compar cogency of financial reports across countries could just be easy to accept as many companies pursue international business.Another advantage of using the IFRS is the belief that it  should withal more cost effective for the write up system information compared with maintaining a adjourn and isolated set of Canadian accounting standards (KMPG Canada, 2007).  This could be the same undercoat for the move by the US to eventual(prenominal)ly adopt harmonization of its accounting standards with the IFRS since non-US companies, which want to list their stocks in the US stock exchanges, are ask still to make translation of IFRS based financial statements into US GAAP based.  From the practical sense of view, it would be easy to see the added cost for companies making still translations in the same way that non-Canadian companies w hitethorn be call for to make the translation  when they go to Canadian stock exchanges.Another advantage of bankers acceptance is to make financial results more transparent and consistent for substance abuser globally, which will mean using more thinker and providing more revelation in the short term (KMPG Canada, 2007).  For this reason,  persons involved in the public order financial reporting of Canada will have to  expect to pass on a lower floor  a steep learning curve (KMPG Canada, 2007).  IFRS and Canadian GAAP compare in just few important lines  but since IFRS standards are countywide and principles-based, it is judge that its application would require greater use of professional judgment than Canadian GAAP.  The availability of more accounting policy choices under  IFRS would bear away companies longer metre now to evaluate these choices for each organization and is judge to result in valuable outcomes in the long-term (KMPG Canada, 2007).2.2 The impact of the IFRS betrothalIt is believed that the first and most obvious impact of IFRS adoption would be in the effect on the designateation of the financial position of an entity as set out in its financial statements  (Romano and Grewal, 2009).  Since IFRS represents a statement of principles that must be applied based on judgment and assumptions given the facts at hand, it is expected that many principles will change including possibly modifying the many rigid prohibitions or rules that have become part of Canadian GAAP over time  via either practice or prescription (Romano and Grewal, 2009).  To illustrate since IFRS allows for more comely prise accounting policy choices, this would open to a greater full point of interpretation and professional judgment.  The new principles underlying the presentation of financial measures will change both the way in which things are measured and what is include in the measurement as wells timi ng of measurement and required disclosure (Romano and Grewal, 2009).The impact of the adoption of the IFRS would be in the allowing greater independence to exercise professional judgment on which will make the financial statements to have greater relevance that will enhance the usefulness of the accounting information.  It may be recalled that the qualitative characteristics of accounting include both reliability and relevance of the accounting information for decision-making (Meigs and Meigs, 1995). A financial information may therefore be too reliable as to approximate a high a degree of objectivity but may no longer be of significance to decision makers since the decision is already done.To illustrate,  a person buying a car  or any emblematic product may be interested to know what is the computed cost of employment for a car that he or she wants to buy for the buyer for analyze it with the actual price of the product. On the other hand, another buyer may not re ally know what is the actual cost but he or she has information that the production possess so much care for that is it pertinent and unique about the product being sold and could be used for commercial production. The second buyer may not have the actual objective cost of production for the product but he or she has a good and businesslike assessment of the situation because of familiarity of relevant information which can generates value and could make a reasonable estimate of the values of possible input cost of the product.  He is therefore more strategically positioned than the first buyer is.  Thus, relevance at this point may be more advantageous than having greater reliability of information.  Adoption of IFRS is in time not expected to amount of total loss of reliability of information.The adoption of IFRS is criticized by the fact that it would provide too much management tractableness or the freedom of interpretation that may be adopted with the unanimit y of the independent auditors, thus it would reduce the quality of financial reporting.  There is however, no strong evidence to believe that feared core of the adoption on these ground.  In fact, this feared consequence remains to be seen (Romano and Grewal, 2009).  On the hand, one great inducement of adoption is for greater international comparability due from a horizon of globalized-investment market place.  There is now movement towards the implementation of the adoption and there are now plans to effect a successful transition (Romano and Grewal, 2009).2.3 ensample Partial Application of IAS or IFRS to Business about Fair value AccountingOne sample interesting effect of adoption of IFRS is the eventual effect International Accounting Standard (IAS) 39.  It is asserted that IAS 39  is   partial application of ordinary value accounting since the said standard gives institutions the theory of irrevocably applying fair value valuations to any fina ncial instrument starting from the concept of fair value option (Enria, et al, 2004).It is argued that one fundamental mental synthesis block of  developed by the International Accounting Standards Board (IASB),  the present makers of standards under the IFRS based in UK, is to bring the financial statements up to twenty-four hours with market developments hence, a working group on the issue has proposed the use of Full Fair Value Accounting (FFVA) for all financial instruments.  (Enria, et al, 2004).  age adoption of the IFRS by Canada would not immediately result to adoption of fair value accounting, it will open the great possibility because as give tongue to earlier, the use of international accounting standard would give more flexibility to companys management and accounting professionals and fair value accounting is part of the IFRS.If it feared that FFVA could produce effects on financial stability of banks, the same arguments could be made applicable to t he Canadian companies, which are just to co-exist with other international and global companies in the use of IFRS.  The analysis of authors found validation about concerns on the potential wider application of fair value in unduly increasing the volatility of banks balance sheets, which could reduce possibly ability of companies to react to adverse shocks.  The adoption of fair value could also result to the pro-cyclicality of the bank lending especially if the application of fair value happens simultaneously with other developments under a new accord.  Thus, one of possible consequence is for encouraging banks to react if values change by use of FFVA by panic selling and tightening lending standard (Enria, et al, 2004).  The effect could be far reaching as it could bring a possible financial crisis at the worst case possibly.From deeper tests, however, the researchers have found no evidential impact on volatility by the introduction of FFVA standards for compani es studied in the 1980s and 1990w.  However, they directioned about the need to be interpret the result with caution for several reasons and call for further research citing as one reason the lack of clear-cut choice of the cut-off dates on which banks change from one accounting standard to the other (Enria, et al, 2004).3. ConclusionTo conclude, this researcher  believes that the adoption  by the Canadian Accounting Standard Board of IFRS for companies  concerned starting in 2011 will result to  more useful information that would make securities markets either more or less efficient than not adopting the said international accounting standard.  The adoption, while could result to possibly losing some reliability,  is expected bring  greater relevance of the financial statements and increased comparability which would then it more useful for Canadian companies and the users of these information.  The possibility of losing some reliability may pos sibly be counter checked by user still requiring from these companies from which they would like to administrate with the production of financial statements prepared under the present Canadian GAAP but they could run the risk of losing the benefit of a decision that would be based on relevant grounds.  The mere fact that CASB has announced the adoption should signal there the advantages could outweigh the disadvantages of IFRS adoption.