Country Differences in Accounting Standards

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Topic: Country Differences in Accounting Standards
Paper Type: Coursework
Word Count: 900 words
Pages: 04 pages
Referencing Style: Harvard Referencing
Educational Level: Graduation
Country Differences in Accounting Standards
[Writer’s Name]
[Institute’s Name]
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Country Differences in Accounting Standards
Ans- 1) Benefits of IAS for Investors and Business Enterprises
In the past, various accounting practices followed in nations made difficult for Investors
to assess the financial reports of companies operating in different companies. The International
Accounting standards are essential phase of the financial reporting and they support investors in
their decision making. According to Barry (2010), the educated investors require useful and
relevant information to make informed decisions over their investment. It maintains and
safeguards the confidence of investors that the business they are investing is worthwhile.
By the implementation of IAS, the interests of investors are ensured as the financial
statements they reviewed were genuine and accurate. In the light of investors they are concerned
with the repayment over their investment and the level of return over the investment.
In business point of view the trust of investors will help corporations to easily issue the
shares in Stock exchange. This also reduces the cost of capital as less risk is inherited by the
investors and it also enhances the image of business in the international market. The preparations
of financial costs are also reduced.
Business enterprises have to apply IAS to ensure the smooth running of cash flow and
business. By adhering to the standards, the Business can assess their performance with their
competitors or other companies. It will also prevent Businesses from incurring legal expenditures
initiated by the government for those companies does not meet regulatory compliance. The
financial statements prepared in accordance with IAS will help business to improve the
operations and maintain good relationships with their users of financial statements. It will help to
better negotiate with suppliers, customers and lenders.
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Ans-2) Potential Risks & Challenges faced by Nations due to implementation of IAS
 The International standards are more focused towards rules based and their complex
structure is affecting small and medium sized entities. The IAS has become difficult to apply on
audits of financial statements. Achievement of IFRS (International Financial reporting standards)
depends upon the functioning of IASB (International Accounting Standards Board) that benefit
from the market participants around the globe. In order to secure the assurance, the IASB needs
to secure a constant funding and suitable governance procedures to assure that standards process
is free from influence of various components.
 A substantial number of countries have implemented IFRS in order to realise the benefits
of accounting standards. It is necessary that IFRS is followed by nations in a similar manner that
was issued by IASB. There should also be a system to assure that auditing standards adopted by
auditors aid constant application of IFRS. In order for US to effectively transfer to IFRS, it
demands significant investment and effort from all the market participants.
There are some of the challenges faced by nations due to the Transition of IAS. This
would raise the education and training requirements for the accountants, auditors, investors and
those people involved in the preparation and users of financial statements. This would create the
need of academic studies based on IFRS at the university level and increased requirements for
the accounting bodies to restructure their courses.
Many Businesses will have to upgrade their Accounting Software to reflect the reporting
requirements of IFRS. The regulators will have to adjust with the new disclosure requirements.
The Investors and Lenders will have to become aware with financial statements prepared in
accordance with IFRS. 
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Ans-3)
The listed companies of UK adopted IFRS in 2005. The IFRS is affecting US companies
along with the subsidiaries of UK companies in America. Currently US GAAP (Generally
Accepted Accounting Principles) is followed for reporting purpose and the adoption of IFRS will
brought major changes in preparation of financial reports. Currently the companies of US are
facing indirect influence of IASB standards due to their adoption by foreign subsidiaries mainly
in seller and customer transactions (Barth, 2008).
Before the adoption of IFRS standards in China, the accounting standards followed in
china were similar to US GAAP. The IFRS requires accountants to give more time over
assessing accounting practices on corporate transactions in principle based accounting standards.
In the early years of IFRS adoption, a considerable rise in audit fees was found in Chinese
companies (Chan, 2006). The criteria mentioned by IASB