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Advantage of Ifrs

Autor:   •  December 8, 2018  •  Study Guide  •  252 Words (2 Pages)  •  186 Views

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Advantage of IFRS

  1. Rapid improvement in perceived quality and status of financial report
  • This entails that with better accounting standards and greater transparency, investors would be more confident of the financial information available (Daske, 2006) and would have greater confidence in investing in equity markets.

  1. A decrease to costs of capital

-Mandated disclosures could reduce the cost of capital through at least two different paths: increasing the quality of financial disclosure and enhancing information comparability. However, empirical evidence suggesting that the positive effects of IFRS adoption on the cost of capital can only emerge if the improve in quality reporting and the enhanced information comparability across firms is consistent with firms’ reporting incentives and enforcement mechanisms

  1. An increase to inflows of foreign capital
  • In today's global economy the consistency of one reporting standard will make it more efficient for investors to research and compare financial statements globally and more effectively.

Disadvantages of IFRS

  1. Information overload
  • IFRS effect substantial increase in volume of annual reports.
  • The concern of the accounting firm shows that though detail disclosure in financial reports is of importance, when volume exceeds a limit, it rather creates problems to users in processing and making the best out of the information for their decision purposes.
  1. Additional cost
  • This comprises of changing the internal systems to make it compatible with the new reporting standards, training costs and etc.
  • Also, it will take a substantial amount of time to convert to IFRS completely, depending on the size of the company.


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