Pros and Cons of International Financial Reporting Standards

Pros and Cons of International Financial Reporting Standards
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Introduction
The International Finance Reporting Standards (IFRS) are accounting guidelines for public corporations tailored to ensure that companies' financial reports demonstrate transparency, consistency, and comparability across the globe. Initially, the establishment of IFSR aimed to enhance reporting quality and improve financial statements comparability across all countries globally. Accordingly, 2023 marks the twenty-second anniversary since the European Union (E.U) approved IFRS for all firms enlisted on its key European stock markets. Since its approval by E.U., IFRS has had its share of pros and cons. IFRS has achieved international adoption, with over ten thousand companies in more than 100 jurisdictions basing their domestic accounting principles. Proponents of IFRS adoption suggest that it improves financial accountability and transparency and lowers information asymmetry, thus allowing countries to activate the interests of foreign investors. The significant criticisms against IFRS come from practitioners and related users. In this context, practitioners typically argue against the IFRS board's fair value requirements, governance, and transparency structure, questioning its legitimacy in issuing the accounting guidelines. Some benefits of IFRS execution include improved financial accounting transparency, the capacity to boost foreign investments, and better comparability of financial reports. The paper also includes criticisms against IFRS adoption, citing the lack of technicality, financial reports' incomparability, and the high cost of implementation efforts.
Critical Discussion for/against IFRS Adoption
Pros of IFRS Adoption
Improves Financial Accounting Transparency
Typically, financial statements are prepared to inform the stakeholders about the company's financial performance to support their investment decisions. Financial statement information quality is significantly influenced by the book-keeping rules used by financial practitioners in preparing them. IFRS can be theorized as practical regulations central to the preparation of high-quality financial reports. As a high-quality principle-driven guideline, IFSR improves transparency by encouraging disclosure and effective comparability between economies, which offers an impetus for low information asymmetry thresholds. It also assists in predicting a firm's possibility of financial challenges based on the status quo. Indicators of financial distress in corporations enable investors, management, and other stakeholders to take the appropriate measures (Ebaid, 2022, n.p). In addition, financial distress signs help management to predict organizational challenges early enough to prepare and take necessary precautions to avoid financial problems leading to a stable financial performance (Valiyev et al., 2021, p.587).
Increased Foreign Investments
The IFRS conference discusses and drafts transparent and efficient financial data for all global investors in different financial markets. Reviewing comparable accounting data, investors can make accurate and rational decisions before in...