This paper examines the adoption and transition processes associated with the International Financial Reporting Standards (IFRS) and the International Accounting Standards Board (IASB). Beginning with the historical origins of the International Accounting Standards Committee in 1973, the paper traces the evolution of global accounting governance through to the IASB's formation in 2001. It surveys the adoption experiences of major economies including the United States, the European Union member states, and India, highlighting the costs, regulatory conflicts, and implementation challenges each faces. The paper argues that effective global integration of accounting standards depends primarily on the capacity of participating economies to educate, certify, and monitor accounting professionals in a field increasingly central to international capital markets and corporate governance.
The paper effectively uses synthesis across heterogeneous source types — blending policy documents, scholarly histories, professional accounting firm advisories, and news reporting — to construct a coherent argument about the state of IFRS adoption. Rather than treating each source in isolation, the author weaves them together to show convergent and divergent trends across national contexts, a technique central to literature-review and research-paper writing at the graduate level.
The paper opens with a broad framing of the accounting profession's expanded role, then narrows progressively: from the historical origins of the IASC and IASB, to IFRS's declared objectives, to specific national adoption experiences. The U.S. convergence discussion is the most detailed, covering cost estimates, SEC timelines, and hedge fund exemptions, before broadening again to the EU and India. The conclusion returns to the overarching argument that global compliance is inevitable, even if uneven in pace.
Traditionally, the accounting profession has been seen as a functionary occupation, the practitioners of which are concerned with the presentation of economic figures relating to individual and organizational financial performance. Accountancy has been seen largely as a field reserved for mathematical grunt-work, with its output serving as indicative of performance rather than incursive upon it. Today, that perspective has been altered significantly, for better and for worse. The role of accounting professionals has both diversified and expanded considerably over the past few years, with practitioners in this field coming to serve as primary decision-makers and organizational visionaries in their own right. This serves as a testament to the crucial contribution of accountancy-derived economic insight in the determination of sensible and profitable business decisions, reporting practices, and levels of compliance with international law.
In many ways, both in highly developed economic contexts such as the United States, the United Kingdom, and the European Union, and in developing parts of the world, the importance of organizational accountancy has accelerated alongside the growing interdependence of various parts of the global economy. This is the reality that has contributed to the development of the International Accounting Standards Board (IASB), the International Financial Reporting Standards (IFRS), and the impetus for the research contained herein. The IASB and its guiding doctrine in the IFRS are designed to regulate accounting standards across a global community. With economies in both the developed and developing spheres interacting with greater fluidity under current global economic structures, there is a clear need to establish consistency and control across the range of responsibilities that fall upon the accountant.
The research undertaken here examines in specific detail the various implications of this issue through the lens of the accountancy profession. Areas of consideration include: the proliferation of free trade and the economic aims of globalization; the nature of the accounting profession today, especially in light of accountancy's role at the base of many major economic scandals; the experiences of developed markets such as the United States, the United Kingdom, Canada, Australia, and India under the IFRS; the experiences of fast-developing but smaller markets; and the general challenges facing all nations, continental unions, and the IASB itself in realizing the broader aims of the Standards in question.
A thorough discussion of these areas will help to provide a firm basis for understanding the importance and meaning of the IFRS, from which key provisions will be examined in detail. The primary objective of this study is to clarify and evaluate the terms of existing international agreements on financial reporting standards with respect to the accounting profession. The research promotes the argument that effective global integration of standards will be based primarily on the capacity of participating economies to educate, certify, and monitor accountants in a field that has suffered in recent years for its shortcomings in ethicality, competence, and legal compliance.
The present moment is one of historical importance where the international recognition of accounting standards is concerned. For the IFRS, the latter part of this decade has seen myriad advances in terms of the refinement of its principles, the expansion of its influence to compliant states, and its proximity to its ambition of universal accounting standards for the global community. In many ways, though there is both a detailed history of evolution producing the IFRS and a clear global context for its emergence, it is only now in its incubation phase. The following history is a concise recounting of the events and context leading to this moment, simultaneously helping to illuminate the intended purpose of IFRS, its stated objectives, and the conditions that helped to produce the policy terms examined in detail hereafter.
The history of IFRS ostensibly begins in 2001 with the creation of the International Accounting Standards Board. "Although it is several decades since the International Accounting Standards Committee — the forerunner of the International Accounting Standards Board — first started to develop standards for international use, it is only in the last few years that major steps have been taken to achieve substantive convergence on a global scale. At the heart of that convergence is IFRS." (Dilks, 1)
The International Financial Reporting Standards were enacted with the creation of the IASB in 2001, but their development actually precedes this considerably. The IASB's formation was the offshoot of the already enacted International Accounting Standards, themselves produced by the International Accounting Standards Committee (IASC). The IASC was organized in 1973 and represented the most substantial recognition to that point of the internationalization of capital markets following World War II. Its members were emissaries of their respective nations who, as accountancy professionals, corporate leaders, or financial scholars, served in a part-time capacity to help establish regulations applicable to the unique challenges of international commerce. (Camfferman & Zeff, 1)
It was at the juncture preceding its emergence that the IASC would be conceived in response to an apparent need to address the rising tide of firms with operations spanning differing national contexts. The desire to reconcile the inconsistencies that had obfuscated financial reporting for such entities led to the Committee's development being spearheaded by British accountancy professional Sir Henry Benson. In response to this problem, "Benson secured the support of the principal accountancy bodies in Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom, and the United States to establish a body that would narrow the differences across accounting standards." (Camfferman & Zeff, 1) Thus, the initial office for the operation was established in London and funded by the accountancy groups of each member country.
As with many international governing bodies, the IASC began with a far more informal tone and purpose than that which subsequently evolved. From the time of its formation through its first decade, the Committee issued policies designed with a high degree of flexibility — less a matter of enforcement than of clarification in areas where differing national accounting policies might demand guidance. That said, the policies it created would begin to take on greater seriousness when applied to developing countries that, in their interest in becoming more integrated with the world economy, found stricter compliance to be in their best interests. This scenario would ultimately segue into the era of globalization. As Camfferman & Zeff note, "as the pace of globalization picked up in the 1980s and especially in the 1990s, the IASC, with strong encouragement from major securities market regulators, began improving its standards to a level of quality that commanded the attention and respect of national and regional regulators, national standard setters, major multinational companies, and leading accountancy bodies." (Camfferman & Zeff, 1)
With this improvement came an increasingly sturdy reputation as the foremost standard-making body for international accounting, which Camfferman & Zeff indicate would ultimately be transferred to the restructured and renamed International Accounting Standards Board. With the release of its International Financial Reporting Standards — comprising a new set of Standards (IFRSs) and either revised or commuted pre-existing Standards (IASs) — the IASB positioned itself as the primary entity for guidance, regulation, and oversight of international accounting and financial reporting.
Though there are certainly challenges, setbacks, philosophical conflicts, and practical discrepancies which arise, these are addressed by the overarching principle that "a high standard of accounting and financial reporting is an important factor in the proper functioning of capital markets and in strong corporate governance." (Camfferman & Zeff, 2) This is especially true as the complexity of international markets becomes a more persistent reality for nations collectively opening their borders to international trade. The primary ambition for establishing these regulatory conditions is the refinement of how financial reports are presented so that they become increasingly informative and useful to decision-makers.
Camfferman & Zeff offer one of the underlying premises to both the initiation of the IASC and the transition to the IASB, while also setting out a fundamental principle of this research. The authors argue that "accounting standards have the potential to contribute significantly to an improved quality of financial reporting by playing an educational role, by encouraging the resolution of differences of view through discussion and debate, and by imposing a more or less arbitrary but nevertheless useful consistency in treatment in cases where a consensus has not yet emerged." (Camfferman & Zeff, 2) The purpose which stands above many others is the improvement of financial reports as informative documents with the built-in capacity to educate users as to the financial disposition and outlook of reporting entities.
The declared purpose of the IFRS is to improve the comparability, clarity, relevance, and reliability of accounting processes and the resultant financial reporting across a global scale. (IASC Foundation, Framework) This purpose is directly correlated to the apparent direction in which the global economy has moved across the last few decades, with the deconstruction of trade barriers and the forging of encompassing exchange agreements producing circumstances where proponents see a categorical necessity in standardizing accounting practices. Therefore, in a discussion of the global applications of the IFRS — considered through the adoption challenges, procedures, and experiences of key nations — there is a core understanding that fundamental differences among nations have rendered the adoption process widely variant. The global applications of the IFRS, though intended to achieve uniformity in the long run, are presently characterized by transitional processes that naturally differ according to venue.
Certainly, one of the greatest successes observable at this juncture is that the IFRS has experienced fast and widespread uptake, with nations actively seeking participation and in some cases pursuing very aggressive transitional tactics in order to achieve compliance with speed and purpose. At present, although still in its induction phase, IFRS is the largest and most determinant of global accounting bodies. To this point, "approximately 100 countries already require, allow, or are in the process of converging their national accounting standards with IFRS. FASB and the IASB have agreed to converge their respective standards. The SEC also has a road map to allow foreign issuers that list on U.S. exchanges to report exclusively in IFRS by 2009." (Gill, 1) There is a clear incentive for such nations as the United States, where considerable and diverse foreign investment and ownership permeates the economy, to achieve a uniformity that eases financial observation and planning.
This is why the United States is undergoing a convergence of its Generally Accepted Accounting Principles (GAAP) with the IFRS, bringing the accounting principles governing its internal market into concurrence with international conditions. So too are quite a few other major economies. "Countries such as Japan, the United States, and Canada have active programs designed to achieve convergence with IFRS. China's Accounting Standards Committee has announced that convergence is a fundamental goal of its standard-setting program, and the Institute of Chartered Accountants of India has taken up the issue of convergence of Indian accounting standards with IFRS." (Gill, 1) It still bears noting that at this early stage, even many of those nations which have actively and voluntarily attempted to align with IFRS terms have not necessarily succeeded in achieving full compliance or consistency. Gill (2007) makes the case that there is certainly evidence of global convergence upon these shared standards, but that we are still in the incubational phase of this convergence process.
All these factors considered, this is a fully appropriate time to offer an account that provides an overview of IFRS — one that serves both as a supplemental document to the issued set of Standards and as a standalone commentary on the IFRS. Accordingly, the composition of this report coincides with the end of the comment period for the United States, officially noted as drawing to a close on April 20, 2009, making this a timely discourse. (Edwards, 1) The issues discussed throughout, both with and without political connotation, are of discrete importance as such nations as the United States move toward compliance.
You’re 52% through this paper. Sign up to read the remaining 2 sections.
Sign Up Now — Instant Access Already a member? Log inAlways verify citation format against your institution’s current style guide requirements.