What are the disadvantages of IFRS?
International Financial Report Standards (IFRS) are the methodology of accounting for the preparation of financial statements. This set of standards is designed to replace the generally accepted accounting principles for each country (GAAP), so the financial statements of any corporation around the world can be evaluated based on the same set of accounting principles. Although global standardization of accounting standards has many advantages for international business, it also represents some disadvantages, especially for countries that have a well -established GAAP. The disadvantages of IFR include lack of details, significant adoption costs and perception that IFR is a smaller standard than in some countries already introduced.
Investors, regulators, employees and the general public rely on the financial reporting system, which requires corporations to reveal details of their financial situation each year. This information must be presented in a uniform manner that allowing information with industrial standards to be compared. ThatThe financial reporting standardization has been ensured, accepting the accounting industry of each GAAP district, which regulates the correct way to introduce financial information on behalf of the company.
When corporations operate only within its own borders, National Gaap is a suitable guide for financial reporting. With the globalization of markets and the rise of multinational companies, for many companies, it has been considered to be difficult to provide standard information that corresponds to the GAAP in one country without violating the GAAP in another. The Council of International Accounting Standards (IASB) supported IFA acceptance that would apply worldwide and allow consistency in financial reporting, regardless of where the company is located.
Although many countries have accepted IFRS, there are significant detention. For some countries, some disadvantages of IFRS predominate over the current advantages. The most important example of the country where the disadvantages of IFRThey influenced and delayed the transition to global accounting standards, are the US.
arguments about the disadvantages of IFRS in the US point to the fact that IFRS is less detailed than the US GAAP. In order to achieve global standards that are acceptable to all, IASB had to sacrifice the level of details that national standards currently have due to the process of standing standards over time. The US GAAP is also considered the gold standard of financial reporting. In the US and countries like Canada, there is only a small incentive to accept what some consider to be a smaller standard for global consistency.
Other significant disadvantages of IFRS relate to the cost of implementation. Accounting profession in every country that receives new standards and training. Corporations would also have to invest time and resources in the reeducation process. Another problem is the cost of corporations that only work at national level. The cost of these corporations when switching to IFRS is far from any benefits.