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International Accounting Standards: Advantages and Disadvantages

Advantages of Adoption of International Accounting Standards

A good number of countries around the world have already assumed the international accounting standards and others have well-stipulated plans aimed at aiding the concerned countries in adopting these standards. Many advantages are accrued by adopting these standards. For instance, the country’s multinational companies will have reduced costs in financial reporting matters, which will help the companies to expand their operations in many parts all over the world.

In addition, they will also increase their revenues through reduced costs. The countries will have improved welcoming easy access to all the capital flows in the international market. Moreover, business transactions between the country’s companies and companies from different countries all over the world become easy and fast. By adopting these standards, businesses in a country will be able to represent their financial statements using the same format as their foreign competitors thus making their comparison simple.

Companies having subsidiaries in other foreign countries will be capable of using just one language in all their accounting matters and too, the country will be able to attract and retain foreign investors and the country’s companies can be able to raise extra capital from foreign countries. Thanks to the adoption of these accounting standards.

Challenges of Adoption of International Accounting Standards

Despite many countries striving to adopt or having spelled out the strategies that would make them scoop a share of the many benefits associated with solid adherence and fulfillment of the requirements of international accounting standards, their adoption process challenges are multifold. For the businesses in a country to implement the standards, education of its existing accountants and auditors is required.

On the other hand, commitment of the company’s resources, which for many small scales and medium-sized businesses are not likely to accept to trade it off. In addition, with investment in profit, generating activities is required. Colyvas (2011, pp.65) argues that “…the dynamics of updating the existing standards is yet another enormous challenge.” Before a company fully equips its staff with the requisite information underlying the procedures to be followed to ensure compliance with the standards, the standards in question are likely to have been upgraded or altered completely altogether.

This is exemplified by the revision of the nine standards out of the already existing adopted 23 standards. Large numbers of changes are anticipated, as all countries internationally rapidly join the accounting standardizations body. To meet the set standards most of the businesses would require upgrading and or redesigning their computerized or manual accounting systems. A need for flexible systems is one of such accounting system redesign to achieve the full realization of adoption of assets impairment standards. This would help to get hold of losses that have cumulated because of assets losses in addition to the assets accumulated value loss due to usage or possibility of the onset of asset or group of assets obsolescence.

The methods of analyzing financial records employed by the country pose a challenge to the adoption of accounting standards. Screening of the traditional financial reporting systems is necessary to provide loopholes-free interpretation of key terms such as operating and finance tasks of an organization about similar terms usage by other organizations.

Piera (2010, pp.106) argues that “Unwillingness of a country’s government to alter the nature of the tax rules and laws also renders an organization incapable of fulfilling its desires to adopt an international accounting standard.” The implications of the adoption of the international accounting standards are worth incorporating in setting tax rules and regulations if at all a country wants to influence its business organizations in adopting the standards.

Reference List

Colyvas, B.,.2011. Interpretation and Application of International Financial Reporting Standards. San Francisco: Wiley Publishers.

Piera, W., 2010. Financial Reporting under IFRS: A Topic Based Approach. San Francisco: Wiley Publishers.

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"International Accounting Standards: Advantages and Disadvantages." Essay4Business, 14 Apr. 2022, essay4business.com/international-accounting-standards-advantages-and-disadvantages/.

1. Essay4Business. "International Accounting Standards: Advantages and Disadvantages." April 14, 2022. https://essay4business.com/international-accounting-standards-advantages-and-disadvantages/.


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Essay4Business. "International Accounting Standards: Advantages and Disadvantages." April 14, 2022. https://essay4business.com/international-accounting-standards-advantages-and-disadvantages/.

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Essay4Business. 2022. "International Accounting Standards: Advantages and Disadvantages." April 14, 2022. https://essay4business.com/international-accounting-standards-advantages-and-disadvantages/.

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Essay4Business. (2022) 'International Accounting Standards: Advantages and Disadvantages'. 14 April.

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