Introduction
The companies in United States are struggling to adopt the new international financial reporting standard (IFRS) after approval by the securities exchange commission transforming from generally accepted accounting principles.
The common global language makes the financial reporting of companies to be easily understood and compared across the globe. This creates total transparency as the accounting out puts under IFRS clearly reflects what is actually happening on the ground. This helps companies to make necessary adjustments and comparisons enhancing sustainable competition as the financial analysts of respective companies take the opportunities to compare their financial position with their competitors in the same field across industries and countries thereby diversifying portfolios. The IFRS has precise degree of consistency in financial reporting as the parent companies in U.S and their subsidiaries across international boundaries make financial statements which conform to accounting policies that regulate reporting on similar transactions. This consistency reduces the cost of capital, as globalised time saving standards does not require further translation or reconciliation costs hence reducing the risks and information costs to the companies economy hence increasing the efficacy. The comparative updating of financial statements increases quality in reporting with the activities of parent and subsidiary companies being centralized. This sufficiently provides investors with quality information they need advancing companies’ ability to acquire more capital as many investors are attracted. Consequently, the treasury can effectively calculate and forecast the future dividends payable to the parent companies with the directors figuring out the tax provisions primarily depending on the true, fair and simpler statutory financial statements prepared under IFRS.
As the US subsidiary companies across the world have been widely using globally accepted standards based on principle objectives (IFRS) than their parent companies in U.S, the implementation of IFRS in U.S may face obstacles .Such as methods of recoding, dividend distribution policies and contradiction with existing regulations; companies must carryout self assessment to ascertain their strengths and weaknesses in adopting international financial reporting standards.
Work Cited
Gearing Up for Change: Why U.S. Companies Could Benefit from International Financial Reporting Standards, Deloitte Insights Podcast, EDT, 24th Jun 2008(Podcast with transcript).Web 3rd Nov 2012.
