International

Business
Management
Assignment

Keshav Khandelwal

PGDM 2017-19
Introduction
The international accounting standards committee, formed in
1973, was the first international standards setting body. It was
recognized in 2001 and became an independent international
standard setter, the International Accounting Standards Board
(IASB). Since then, the use of International Accounting
Standards progressed. As of 2013, the European Union and
more than 100 countries either require or permit the use of
international financial reporting standards (IFRS) issued by the
IASB or a local variant of them.

International Accounting Standards are older accounting

standards which were replaced in 2001 by International
Financial Reporting Standards, issued by the International
Accounting Standards Board, an independent international
standard setting body based in London.

International Accounting Standards were the first international

accounting standards that were issued by the International
Accounting Standards Committee, formed in 1973. The goal
then, as it remains today, was to make it easier to compare
various businesses around the whole world, increase
transparency and trust in financial reporting and foster global
trade and investment.

Definition
“A set of accounting standards developed and supervised by the
UK-based International Accounting Standards Board (IASB).
While the IASB has no authority to require countries to comply
with its standards, many jurisdictions around the world do so.
The most notable exception is the US, which is governed by its
own Generally Accepted Accounting Principles (GAAP).”
History
The International Accounting Standards Committee, formed in
1973, was the first international standards-setting body. It was
reorganized in 2001 and became an independent international
standard setter, the international accounting standards board
(IASB). Since then, the use of international standards has
progressed. As of 2013, the European Union and more than 100
other countries either require or permit the international
financial reporting standards (IFRSs) issued by the IASB or a
local variant of them.

Moreover, its other responsibility is to keep member bodies

informed of the latest developments and standards by issuing
exposure drafts from time to time. Needless to mention that the
Institute of Chartered Accountants of India and the Institute of
Cost and Works Accountants of India are members of the
International Accounting Standards Committee.
Objectives
• To formulate and publish in the public interest accounting
standards to be observed in the presentation of financial
statements and to promote their worldwide acceptance and
observation.

• To work for the improvement and harmonisation of

regulation accounting standards and procedures relating to the
presentation of financial statements.

• To develop, in the public interest, a single set of high

quality, understandable, enforceable and globally accepted
international financial reporting standards (IFRS Standards)
based upon clearly articulated principles. These standards should
require high quality, transparent and comparable information in
financial statements and other financial reporting to help
investors, other participants in the world's capital markets and
other users of financial information make economic decisions.

• To promote the use and rigorous application of those

standards.
• In fulfilling the objectives associated with (1) and (2), to
take account of, as appropriate, the needs of a range of sizes and
types of entities in diverse economic setting.

• To promote and facilitate adoption of IFRS Standards,

being the standards and interpretations issued by the Board,
through the convergence of national accounting standards and
IFRS Standards

 IASC issued the following International Accounting

Standards till to date:

o IAS 1 — Disclosure of Accounting Policies

o IAS 2 — Valuation and Presentation of Inventories
o IAS 3 — Consolidated Financial Statements and the
Equity Method of Accounting
o IAS 4 — Depreciation Accounting
o IAS 5 — Information to be disclosed in Financial
Statements
o IAS 6 — Accounting Response to Changing Price
o IAS 7 — Statement of Changes in Financial Position
o IAS 8 — The Treatment on the Income Statement of
usual Items
o IAS 9 — Accounting for Research and Development
Activities
o IAS 10 – Contingencies and Events Occurring after
Balance Sheet Date
o IAS 11 — Accounting for Construction Contracts
o IAS 12 — Accounting for Taxes and Income
o IAS 13 — Presentation of Current Assets and Current
Liabilities
o IAS 14 — Reporting Financial Information by
Segments
o IAS 15 — Information Reflecting the Effects of
Changing Price
o IAS 16 — Accounting for Property, Plant, and
Equipment
o IAS 17 — Accounting for Leaves
o IAS 18 — Revenue Recognition
o IAS 19 — Accounting for Retirement Benefits in the
Financial Statement of Employee
o IAS 20 — Accounting for Govt. Grants and
Disclosure of Govt. Assistance
o IAS 21 — Accounting for Effects of Changes in
Foreign Exchange Rates
o IAS 22 — Accounting for Business Combinations
o IAS 23 — Capitalisations of Borrowing Costs
o IAS 24 — Disclosure of Related Party Transactions
o IAS 25 — Accounting for Investments
o IAS 26 — Accounting and Reporting by Retirement
Benefit Plans
o IAS 27— Consolidated Financial Statements and
Accounting for Investments in Subsidiaries
o IAS 28 — Accounting for Investment in Associates
o IAS 29 — Financial Reporting in Hyperinflationary
Economics
o IAS 30 — Disclosure in the Financial Statements of
Banks and Similar Financial Institutions
o IAS 31 — Financial Reporting of Interests in Joint
Ventures
o IAS 32— Financial Instruments: Disclosure and
Presentation
 o IAS 33— Earning Per Share
o IAS 34— Interim Financial Reporting
o IAS 35— Discounting Operations
o IAS 36— Impairment of Assets
o IAS 37— Provisions, Contingent Liabilities and
Contingent Assets
o IAS 38— Intangible Assets
o IAS 39 — Financial Instrument : Recognitions and
Measurements
o IAS 40— Investment Property
o IAS 41 — Agriculture

There has been significant progress towards developing a single

set of high-quality global accounting standards since the IASC
was replaced by the IASB. IFRS have been adopted by the
European Union, leaving the U.S., Japan (where voluntary
adoption is allowed) and China (which says it is working
towards IFRS) as the only major capital markets without an
IFRS mandate. As of 2018, 144 jurisdictions require the use of
IFRS standards for all or most publicly listed companies, and a
further 12 jurisdictions permit its use.

 Purpose
The purpose of these standards is to ensure that the financial
centers of the world, which have become more interconnected
than ever, can use a global financial reporting framework that
ensures effective regulation of financial markets. The growing
volume of cross-border capital flows makes having international
standards, that are high in quality and testable across the board,
a priority. By having these standards in place, capital markets
that are located in different jurisdictions can create the most
efficient capital flows that are beneficial to regulators,
organizations, and the market as a whole.

As the corporate world has become rigorously attentive,

thorough and strict in its trade and financial rules, a lot of
countries have already move from the Generally Accepted
Accounting Principles (GAAP) towards the International
Financial Reporting Standards (IFRS), of which common
accounting rules define what information must be disclosed in
financial statements and how transactions must be reported.

While this unitary set of standards has addressed and solved

many issues, it has also created other problems. Here are the
advantages and disadvantages of adopting IFRS:

List of Advantages of Adopting IFRS

1. It allows for greater comparability

Businesses using similar standards to prepare financial

statements can more accurately compare with each other. This is
very useful when comparing businesses that are based in
different countries, as they may otherwise have different
methodologies and rules in preparing these documents. This
greater comparability has aided investors to better identify
where their investments should go.

2. It is beneficial to new and small investors

The IFRS can help new and small investors by making reporting
standards to have better quality and become simpler, putting
these investors in a similar position with professional investors,
which was not feasible under previous standards. This also
entails a reduced risk for these investors when they trade, as the
professionals will not be able to take advantage because the
nature of financial statements will just be simple to be
understood by all.

3. It creates more flexibility

Using a philosophy that is based on principles, instead of rules,

this set of standards will have the goal of arriving at a reasonable
valuation with various ways to accomplish tasks. This would
give businesses the freedom to adopt IFRS to their specific
situations, which will result in financial statements that are more
easily read and useful.

4. Global Comparability

When different companies are located in different countries,

they use generally accepted accounting principal (GAAP) of that
country. So comparison of financial statement of two
companies located in different countries is difficult. When all
companies in different countries follows the single set of
accounting standard, comparability of financial statement
becomes easy. If financial statements of the companies are
prepared according to IFRS, owners/investors are able to
compare it easily.

5. High Quality and transparency

IFRS uses principal based philosophy rather than rule base

concept philosophy. Rule based philosophy may good for

some entities and bad for others or may good in one period &
may bad in other period. Whereas principal based philosophy
always shows equality and transparent picture. IFRS always
looks into substance over the legal form. This improves the
quality and transparency of the financial statement. IFRS insures
the financial statement should give complete, relevant, accurate
picture and transparent picture of the transactions. There is least
scope of manipulation.

6. More Cross Border transactions and investments

The single set of global accounting standard creates the trust

between the investors and investees, buyer and suppliers, etc.
The foreign investor can easily trust on the financial statement
of the company and can make investment easily. It helps the
companies enhance the confidence of global stakeholders. IFRS
facilitate in the process of mergers and acquisition, access to
international capital and investment. Institutional investors can
increase their holdings if the companies adopt IFRS.

List of Disadvantages of Adopting IFRS

1. It requires high costs

Whether large or small, all businesses would feel the impact if a

country adopts IFRS. However, small companies would not
have sufficient resources to implement the changes that come
with it, not to mention that they would need to train staff or hire
accountants or consultants for assistance. They would simply
bear more financial burden than their larger counterparts.

2. It is prone to manipulation

As businesses can only use the methods that they wish, this
would lead to financial statements show only desired results,
which can lead to profit manipulation. While this new set of
standards requires changes to how the rules should be applied to
be justifiable, it is often possible for businesses to come up with
reasons for making such changes. This means that stricter rules
should be implemented to ensure all companies will value their
statements in a similar fashion.

3. It is not globally accepted

Truth is, that US has not yet adopted the IFRS, so as other
countries that choose to continue holding out as well. This
means that accounting by foreign companies operating in these
countries are facing difficulties because they have to prepare
financial statements using such a set of standards and another set
of principles that is generally accepted in these countries.
THANK YOU