Ideas and Insights

IFRS brings transparency, accountability and efficiency to global financial markets

In an era of globalization, financial reporting according to national jurisdiction local accounting standards present challenges to international investors, capital markets and regulators in taking informed decisions. Therefore, adoption of the International Financial Reporting Standards provides a single set of high quality, understandable, comparable and globally accepted financial statements.

Why should you adopt IFRS?

Today, more than 150 nations permit or require IFRS for most domestic accountable entities, including listed companies and financial institutions. When adopted worldwide, IFRS will benefit companies by enhancing reporting quality and reducing their investment costs.

  • Greater comparability:

    When you use global reporting standards, it allows more accurate comparison of financial statements, even with companies based in different countries. Firms in similar industries are able to compare their financials and identify opportunities for cross-border mergers and acquisitions. The greater comparability, which IFRS provides, will also allow investors to quickly identify potential investment opportunities.
  • More flexibility:

    IFRS is based on principles rather than well-defined rules, allowing greater discretion and flexibility for your management when preparing financial statements. This will give you the freedom to adapt IFRS to suit your specific requirements, resulting in financial statements that are more useful and easily read.
  • Improved transparency:

    Different regulations and standards necessitate generation of multiple financial statements. IFRS provides consistent reporting that is comparable and will allow you to effectively monitor your overseas operations, thereby enhancing transparency.
  • Enhanced market efficiency:

    Global accounting standards enhances uniformity in financial reporting and creates more integrated capital markets. Increased flow of foreign investments, greater efficiency in fund allocation and decreased cost of capital will help you achieve capital savings in the long-run.
  • A level-playing field:

    IFRS places companies, whether domestic or global, on a level-playing field, when preparing and reporting their financial statements. This makes it possible for smaller, domestic companies to learn from larger, multi-national corporations.
  • Additional benefits to stakeholders:

    Investors, lenders and creditors need to understand how changes in accounting standards affect the companies they are investing in. Since IFRS allows your business partners access to more comprehensive and enhanced disclosures, it helps them with better assessment of risks and facilitates informed decision making.

How should you adopt IFRS?

Companies now need to converge their reporting from local standards to IFRS. For businesses, this convergence refers to identifying accounting areas that will change, developing new policies and processes, and implementing new systems to effect those changes. However, this requires careful planning and preparation by the companies, availability of trained and dedicated resources, co-ordination amongst various stakeholders and the firm belief that adoption of IFRS would be beneficial to their business. It is only when these critical elements are in place that sustainable implementation of IFRS can be achieved.

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