International Journal of Research and Innovation in Social Science (IJRISS) | Volume III, Issue VI, June 2019 | ISSN 2454–6186

Benefits and Challenges of Adoption of International Financial Reporting Standards

Waheed Solagbade OLADEJI^#, Elizabeth Oyebola AGBESANYA^*

^#,*Department of Accountancy, The Polytechnic, Ibadan, Nigeria

Abstract:-The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions especially investors who seek diversification and investment opportunities across the world. The application of the principal qualitative characteristics and the appropriate accounting standards normally results in financial statements that provide fair presentation. However, these accounting standards differ from one country to another thereby producing difference in financial statement quality across countries and creating difficulty in comparison and transparency in financial information. The need to harmonize accounting standards which will decrease information asymmetry between stakeholders and the companies necessitates the development of IFRS.This study focuses on identifying the benefits and challenges associated with adoption of International Financial Reporting Standard.

Keywords: Accounting standards, Stakeholders, Information asymmetry, Economic decisions, Financial statements

I. INTRODUCTION

The key to economic development is a sound financial reporting system aimed at making information available for decision making. Over the years, many and several financial reports have come with discrepancies and differences due to application of different accounting standards that render such reports incomparable across nations. Secondly, reconciliation of these reports may not really be possible and thus it becomes difficult to use them to make financial decision across nations.
Consequently, when comparing financial statements under two different accounting standards, the information provided by annual statements may be communicated differently and might even be misleading. (Daske, Hail, Leuz & Verdi, 2000).

As we globalise, the significance of convergence with International Financial Reporting Standards (IFRS) increases because financial information prepared and audited according to National Accounting Generally Accepted Accounting Principles (NGAAP) no longer satisfies the needs of users whose decisions are more international in scope.