IFRS Essay Example | Topics and Well Written Essays - 1000 words

IFRS - Essay Example The reason for opting for gradual convergence instead of adoption is that the local accounting body may want to become involved in the standard setting process. If IFRS is adopted fully then we will just have to accept what a few people have decided for us. I think we should be involved in decisions that affect us, and other countries have taken a similar approach. In fact, Ramanna and Sletten (2009) indicates that there is evidence to suggests that the more powerful countries like the US are not willing to surrender their authority to set accounting standards to an international body. However, Ramanna and Sletten (2009) found that counties are more likely to adopt IFRS when trade partners or countries within the geographical area in which they operate adopt IFRSs. This is one of the reasons for the importance of the transition to IFRS. Hoogervorst (2013) indicates that 75% of the countries in the G20 group of which Indonesia is apart use IFRS. I found out that the reactions in relat ion to the adoption of IFRS are mixed. There are ongoing changes to IFRS and so the gap between Indonesian Standards will widen as new changes are set for this year. In expressing their views to the Vice President of Indonesia some people indicated that at least a level of convergence with IFRS will help to reduce the level of corruption that prevents change from taking place in the country (Shying 2012). Additionally, at an IFRS Regional Policy Forum which was held in Bali in 2011, participants from 21 countries including Indonesia reaffirmed their commitment to ultimate adoption and to achieve accounting standards of the highest quality (CFO Innovation 2011). One of the concerns expressed at the forum in Bali was the requirement of investors for financial statements prepared in accordance with IFRS. This is particularly crucial for companies that need foreign investors. In fact, Hoogervorst (2013) in a speech indicated that full adoption would assist Indonesia sustain economic dev elopment. Hoogervorst further stated that IFRS is close to becoming the global language of financial reporting. Approximately ten years ago only a few countries were using IFRSs. Now over 100 countries have it as a requirement or permit the use of it. The move to accept IFRS has been made for many reasons including the fact that the creation of a common economic market requires a common financial reporting language. With globalisation the world is now one village and so use of the same financial reporting standards make sense for comparative purposes. I agree with Istiningrum (2011) point that the benefits that companies can derive from transition to IFRS outweigh all costs that are incurred during the conversion process. Giri (2008 cited in Istiningrum 2011) makes a compelling case for adoption with an example of a case where translation of Daimler Benz net profit reported of DM 602 million based on a German Accounting Standards changed to a net loss of DM1,839 million when it was translated to US Accounting Standards. With Indonesia adopting this standard more opportunities are provided for investment in Indonesian companies. However, some stakeholders still see a problem since IFRS takes a principle based approach and so Standards can be applied differently by companies (Elena et al 2009). The adoption of IFRS would therefore provide Indonesian compan