Adopting a Single Set of International Financial Accounting Standards Free Essay Example, 1750 words

Immense kinds of literature in support of a single set of IAS have termed comparability of information as the hallmark of the accounting models. Li (2010) noted that economic integration across nations had dramatically increased because of globalization thereby the need for an international-based accounting information system. Advocates of IAS argue that comparable information facilitates international transactions and hence lowering exchange costs. Li (2010) added that the adoption of IAS leads to a similarity of value relevance, the extent of earning management and conservatism. On the other hand, information comparability gains should be examined in terms of similarity facet and difference facet. Chua and Taylor (2008) stated that similarity facet of information comparability demonstrates whether organisations undertaking similar economic ventures announces similar results. On the contrary, difference facet shows whether companies undertaking varying economic activities post diss imilar financial figures. While there exist paucity of knowledge on whether IAS improves on both facets of the information comparability, studies by Kim et al. , (2007) showed that IFRS was more inclined towards the improvement of the similarity facet. In their studies, Barth et al. We will write a custom essay sample on Adopting a Single Set of International Financial Accounting Standards or any topic specifically for you Only $17.96 $11.86/pageorder now (2011) noted that IAS in non-American firm resulted in a more effective comparison of value relevance of earnings and equity book value than when they applied local standards of accounting. The existence of comparable accounting earnings from firms is subject to the nature of the accounting standard utilized by a given firm (Li, 2010). The prevalence of IFRS profoundly promotes comparable financial reporting that in turn lead to information transfer. Apparently, firms have been compelled to adopt IAS based on the knowledge that non-comparable information highly undermines the prediction of the value of other firms based on financial announcements. On the contrary, Jeanjean and Stolowy (2008) discredited comparability as one of the core drivers of IAS.