In 2002, the Financial Reporting Council (FRC) announced that Australia would adopt the accounting standards issued by the International Accounting Standards Board (IASB) from 2005(Baxter 2005). After the first of July 2005, the new standards (IFRS) start to use across national border. companies would be required to report current results under IFRS and restate recent results. They will also have to report their latest results under the old accounting standard, which should make comparing results on a like-for-like basis relatively straightforward. The purpose of this essay is going to give a general idea about advantages and disadvantage of IFRS, which has been widespread debate in the business community.
The aim of the international harmonisation process of Accounting Standards is to reduce or overcome differences worldwide (Deegan 2005). In order to reach a better international Comparability of financial statements, Australian companies have to continue its active participation with FRC to protect Australia's interests.
Advantages of IFRS
The following advantages can be seen from the standpoint of preparers and users of financial reports.
Multinational companies would make savings
With a similar internal reporting system within the company, which gives the chance of better comparisons, less confusion and mistakes between the parts of the company (Neil 2002). It allows uncomplicated communication and transfers of finance personnel. By using one set of Accounting Standards in various jurisdictions and capital markets. Further cost savings can be realised, because the preparation of consolidated financial statements will be easier for companies. Since there are no longer costly changes from several different accounting systems of each subsidiary, when the parts of the company are consolidated to one. With one set of Accounting Standards, the credibility of the externally reporting could be raised (Neil 2002).
International companies can realise significant cost savings if they do not...