Benefits of Adopting IFRS
International Financial Reporting Standards, also known as IRFS is the subject of discussion among financial experts today. Currently, there is a debate on how to enforce changes in how companies file their financial records and statements. Through IFRS, companies would have the option of swapping from GAAP to IRFS. However, this largely depends on the company’s size. In other words, the transition from GAAP to IRFS would help companies to adapt the new regulations efficiently.
1. Consistency
Transition to IRFS provides many perks to companies. Consistency is the most beneficial part of adopting the new standards. In fact, most companies worldwide use IRFS due to its high level of consistency and Canada in setting up plans to adopt the new standards. That way, it seems a logical step that the U.S follow suit. In simple words, adapting IRFS can give companies internal consistency which would reduce reporting costs.
2. Better capital markets
By adopting the new system of standardization, financial reporting on the global scene will place your company in the global marketplace. As a result, this will help in promoting new trade and accessing capital markets. You company will have an opportunity to be recognized as a global player in the capital market.
3. Improves internal communications
Reliable financial reporting would allow multinational companies to apply standardized accounting procedures with its affiliates worldwide, which is necessary to enhance internal communications, decision making and quality reporting.
4. Easy performance appraisal
By increasing competitive markets, International Financial Reporting Standards allows companies to stand out among their peers in the ever competitive capital markets, and gives investors an opportunity to evaluate their performance in order to stay at par with competitors worldwide.
Adopting this system may look different, especially when it comes to deferred taxes, employee benefits, business combinations and financial instruments. In addition, both external and internal reporting features have to be set up to ensure smooth transition.
