Did you know what the difference between SLA and SLE really is? See our FAO post http://faoblog.com/transition-06/

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Advantages of converting to IFRS

Well, globalization to start with for sure. By adopting IFRS, a business can present its financial statements on the same basis as its foreign competitors, making comparisons easier. Furthermore, companies with subsidiaries in countries that require or permit IFRS may be able to use one accounting language company-wide. Companies also may need to convert to IFRS if they are a subsidiary of a foreign company that must use IFRS, or if they have a foreign investor that must use IFRS. Companies may also benefit by using IFRS if they wish to raise capital abroad.

Some points that we had listed in a previous post are:

  • To develop a unified set of accounting and reporting standards
  • To build a single global financial reporting language
  • An accounting framework with global acceptance
  • High quality, transparent, understandable, globally enforceable
  • More cross border transactions
  • Access to international capital and investments
  • Enhance confidence of global stakeholders
  • Facilitate international acquisitions and mergers
  • Peer to Peer Comparison

Disadvantages of converting to IFRS

Despite a belief by some of the inevitability of the global acceptance of IFRS, others believe that U.S. GAAP is the gold standard, and that a certain level of quality will be lost with full acceptance of IFRS. Further, certain U.S. issuers without significant customers or operations outside the United States may resist IFRS because they may not have a market incentive to prepare IFRS financial statements. They may believe that the significant costs associated with adopting IFRS outweigh the benefits.

Some other challenges could be:

  • The market valuation concepts may be a challenge in quite a few situations.
  • Not being rule based, it may develop challenges at certain stages of implementation.
  • First time adoption needs to be planned quite in advance, any delays will delay deployment.