International financial reporting standard pros and cons for inventors
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International financial reporting standard pros and cons for inventors
International Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors Business University of Chicago5807 s. Woodlawn AveChicago, IL 60637Tel. (773) 834 5941 raw bailCg %sb. "Chicago. ed"AcknowledgmentsThis paper is based on the PD Leake Lecture delivered on 8 September 2005 at the Institute of Chartered Accountants in England and Wales, which can be accessed at http: International financial reporting standard pros and cons for inventors .''www.icaew.co.uk cbp index.cfm. It draws extensively on the framework in Ball (1995) and benefited from comments by Steve Zeff. Financial support frInternational financial reporting standard pros and cons for inventors
om the PD Leake Trust and the Graduate School of Business at the University of Chicago is gratefully acknowledged.1AbstractAccounting in shaped by ecoInternational Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors nformation processing costs) makes increased integration of financial reporting standards and practice almost inevitable. But most market and political forces will remain local for the foreseeable future, so it is unclear how much convergence in actual financial reporting practice will (or should) o International financial reporting standard pros and cons for inventors ccur. Furthermore, there is little settled theory' or evidence on which to build an assessment of the advantages and disadvantages of uniform accountiInternational financial reporting standard pros and cons for inventors
ng rules within a country, let alone internationally. The pros and cons of IFRS therefore are somewhat conjectural, the unbridled enthusiasm of allegeInternational Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors omprehensive set of “high quality" IFRS standards, in persuading almost 100 countries to adopt them, and in obtaining convergence in standards with important non-adopters (notably, the U.S.). On the “con" side, I envisage problems with the cuưent fascination of the IASB (and the FASB) with "fair val International financial reporting standard pros and cons for inventors ue accounting." A deeper concern is that there inevitably will be substantial differences among countries in implementation of IFRS, which now risk beInternational financial reporting standard pros and cons for inventors
ing concealed by a veneer of uniformity. The notion that uniform standards alone will produce uniform financial reporting seems naive. In addition. I International Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors d I sincerely thank the Institute of Chartered Accountants in England and Wales lor inviting me to do so. PD Leake was an early contributor to a then fledgling but now mature accounting literature. His work on goodwill (Leake 192 la.b) stands apart from its contemporaries, so it is an honour to cele International financial reporting standard pros and cons for inventors brate the contributions of such a pioneer. My introduction to Leake's work came from a review article (Carsberg 1966) that Ĩ read almost forty years aInternational financial reporting standard pros and cons for inventors
go. Ironically, the review was published in a journal 1 now co-edit (Journal of Accounting Research), and was written by a man who later became a pionInternational Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors ernational Accounting (here in London, at London Business School). It truly is a small world in many ways - which goes a long way to explaining the current interest in international standards.International Financial Reporting Standards (IFRS) are forefront on the immediate agenda because, starting i International financial reporting standard pros and cons for inventors n 2005. listed companies in Europe I nion countries are required to report consolidated financial statements prepared according to IFRS. At the time oInternational financial reporting standard pros and cons for inventors
f speaking, companies arc preparing for the release of then first full-ycar 11RS-compliant financial statements. Investors have seen interim reports bInternational Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors ages of IFRS for investors (the specific topic of this lecture) arc a matter of current conjecture. 1 shall try to shed some light on lire topic but, as the saying goes, only time will tell.1.1.OutlineI begin with a description of IFRS and their history, and warn that there is little settled theory International financial reporting standard pros and cons for inventors or evidence on which to build an assessment of the advantages and disadvantages of uniform accounting rules within a country, let alone internationallInternational financial reporting standard pros and cons for inventors
y. The pros and cons of IFRS therefore are somewhat conjectural, the unbridled enthusiasm of allegedly altruistic proponents notwithstanding. I then oInternational Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors ccess has been achieved in developing a comprehensive set of "high quality" standards and in persuading almost 100 countries to adopt them. On the “con" side, a deep concern is that the differences in financial reporting quality that are inevitable among countries have been pushed down to the level International financial reporting standard pros and cons for inventors of implementation, and now will be concealed by a veneer of uniformity. The notion that uniform standards alone will produce uniform financial reportiInternational financial reporting standard pros and cons for inventors
ng seems naive, if only because it ignores deep-rooted political and economic factors that influence the incentives of financial statement preparers aInternational Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors lue accounting." In addition, I express several longer inn concerns.2. BACKGROUND2.1.What are IFRS?IFRS are accounting lilies ("standards") issued by the International Accounting Standards Board (IASB). an independent organization based in London, UK. They•>purport to be a set of rules that ideally International financial reporting standard pros and cons for inventors would apply equally to financial reporting bypublic companies worldwide. Between 1973 and 2000, international standards were issued by the IASB's predInternational financial reporting standard pros and cons for inventors
ecessor organization, the International Accounting Standards Committee (IASC), a body established in 1973 by the professional accountancy bodies in AuInternational Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors were described as "International Accounting Standards" (IAS). Since April 2001. this rule-making function has been taken over by a newly-reconstituted IASB.1 * 3 The IASB describes its rules under the new label "International Financial Reporting Standards" (IFRS), though it continues to recognize (a International financial reporting standard pros and cons for inventors ccept as legitimate) the prior rules (IAS) issued by the old standard-setter (IASC)? The IASB is better-funded, better-stalled and more independent thInternational financial reporting standard pros and cons for inventors
an its predecessor, the IASC. Nevertheless, there has been substantial continuity across time in its viewpoint and in its accounting standards.'2.2.BrInternational Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors ence much of what I have to say is speculative. There simply is not much hard evidence or resolved theory to help.This was an unsettled issue when I was an accounting student, over forty' years ago. A successful push for mandating uniformity at a national level occurred around the turn of the twenti International financial reporting standard pros and cons for inventors eth century. National uniformity was a central theme of the first1 The International Accounting Standards Committee (IASC) Foundation was incorporatedInternational financial reporting standard pros and cons for inventors
in 2001 as a not-for-profit corporation in the State of Delaware. US. The IASC Foundation is the legal parent of the International Accounting StandarInternational Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors b.org about histoiv.asp.3Congress of Accountants in 1904/ A century- later, there is an analogous push for mandating uniformity at an international level, but in the meantime no substantial, sealed body of evidence or literature has emerged in favour - or against - uniformity in accounting standards International financial reporting standard pros and cons for inventors , at least to my knowledge.4 5There thus is good reason (and. I will argue below, some evidence) to be skeptical of the strong claims that its advocatInternational financial reporting standard pros and cons for inventors
es make for a single global set of accounting standards. So while this means Europe's adoption of IFRS is a leap of faith, it also means it is a BraveInternational Financial Reporting Standards (IFRS): Pros and Cons for Investorsby Ray Ball*Sidney Davidson Professor of Accounting Graduate School of International financial reporting standard pros and cons for inventors me limited evidence) than by a robust, directly-relevant body of research.2.3.Some Thoughts on the Role of Mandatory Uniform Accounting StandardsGọi ngay
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