1. Adoption of the IFRS in many countries has various advantages. It will lead to economic stability in different countries due to the increased foreign investment and division of labor. There will be decreased transaction costs such as training, accountancy, and audit fees for foreign investors. IFRS greatly reduces earnings manipulation as it increases the transparency of the financial statements. There are mandatory disclosures in the off-balance sheet items that make it hard for the company accountants to manipulate the profit and asset figures. It also decreases the costs of equity. The investors are able to understand the accounting data of investments clearer reducing the perceived risks of the project. They are more willing to accept lower returns.
2. Finally, the IFRS encourages fair value accounting which shows the investors the market prices of the company’s assets and liabilities. It acts as a signal in times of economic boom and depression. It also encourages and ensures corporate governance in the company which leads to healthy companies.”
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4. Share your thoughts on this commentary. Do you agree or disagree with their assessment? Why?