Cox on Universal Standards (IFRS)

¶ … Cox on Universal Standards (IFRS)

In 2007, Chairman of the United States Securities and Exchange Commission (SEC), Christopher Cox would release an article through his office touting the necessity for the United States to work with all due diligence to adapt the principles of International Financial Reporting Standards (IFRS) as these evolved under the watch of the world community. The article applies the conditions of the IFRS to mutual fund management and reporting, revealing the changes being imposed upon fund managers by the global community. Cox provides a basic document of support for the regulatory oversight coming to impact mutual funds. This highlights one of the core issues in our research on financial reporting, which reveals this to be a crucial part of the relationship between proper accounting and proper representation.

In a sense, the international standards which Cox endorses proceed from a perspective shared amongst those engaged in the extension of globalization that under such conditions as those imposed in the United States by the Securities and Exchange Commission (SEC), "mutual fund investors don't get a clear and concise description of the fund's investment objectives and strategies, or the fees, risks, and performance of the fund. There's no summary document written in plain English so that investors don't have to dig through pages of legalese for the key information they're after. What's needed is a summary that will quickly give a retail investor a basic understanding of the fund, and that will permit ready comparison of this one fund to others the investor might be considering." (Cox, 1) Therefore, as we consider such parameters as those heavily implicated in the International Financial Reporting Standards (IFRS), where it will be acknowledged that to the perspective of some these global standards actually reflect a trend of deregulation, the value of brevity described here above will factor as a significant defense of the approach.

In a general sense, this dispute is intervened by the common acknowledgement that "in the past few years, a number of accounting researchers have used behavioral field experiments as a means of investigating the relationship between changes in the decisions made by specific users of that data." (Barrett, 50) the outcome of such research has generally been that individuals investing in mutual funds will have primarily based these decisions on the way that data is presented in financial reporting. Therefore, those firms that presume to offer investors the opportunity to see their investments grow through diversification should also be expected to offer investors the wherewithal to make the appropriate decisions with their money.

This highlights a superseding issue of importance relating to financial reporting and especially to a discussion on the enforcement of standardization there within, suggesting that under current terms, it is often difficult or impossible for investors to use available financial reports to make personal financial decisions. For the layperson who is likely to be invested in a stock, a company or a mutual fund, this does reflect a core obstacle to effective decision-making. Indeed, as with many aspects of globalization, the implications of international accounting standards as a concept would only arrive at many of its conflicting points after a period of unencumbered idealism. Again, as the more general discussion on globalization denotes, the implications of a multinational framework for commercial exchange had long been done with a pronunciation of interests to the benefit of the world public. Namely, the assistance which could be provided through the opening of trade barriers in a general sense to the developing sphere, for one instance of commonality, might be seen at the base of the philosophical impetus for both the process of globalization and the symbiotic drive to create universal standards for financial reporting. At this time, it faces its primary resistance in many locales from domestic accountancy bodies which defer to their own domestic standards, typically known as Generally Accepted Accounting Principles (GAAP). However, from the perspective held in many participating nations, the goals of a global capitalist market could be seen to affiliate directly with the success enjoyed by the international movement to set a universal frame for accounting and financial reporting.

The International Financial Reporting Standards are designed to produce a unifying set of standards and procedures for accountancy professionals throughout the global community, which the Cox article endorses as a way to strengthen the financial flexibility and decision-making powers of ordinary investors and mutual fund managers alike. Our understanding of the principles and premises of the IFRS and applicable terms of the IAS will be aided by a greater understanding of the financial reporting standards which are now coming to be regarded as universal