BENEFITS OF CONVERGENCE WITH IFRS

BENEFITS OF CONVERGENCE WITH IFRS

There are many beneficiaries of convergence with IFRS such as the economy, investors, industry, etc.

The Economy: When the markets expand globally the need for convergence increases since the convergence benefits the economy by increasing growth of its international business. It facilitates maintenance of orderly and efficient capital markets and also helps to increase the capital formation and thereby economic growth. It encourages international investing and thereby leads to more foreign capital flows to the country.

 Investors: A strong case for convergence can be made from the viewpoint of the investors who wish to invest outside their own country. Investors want the information that is more relevant, reliable, timely and comparable across the jurisdictions. Financial statements prepared using a common set of Accounting Standards help investors better understand investment opportunities as opposed to financial statements prepared using a different set of national Accounting Standards. Investors’ confidence is strong when Accounting Standards used are globally accepted. Convergence with IFRS contributes to investors’ understanding and confidence in high quality financial statements.

The Industry: A major force in the movement towards convergence has been the interest of the industry. The industry is able to raise capital from foreign markets at lower cost if it can create confidence in the minds of foreign investors that their financial statements comply with globally accepted Accounting Standards. With the diversity in Accounting Standards from country to country, enterprises which operate in different countries face a multitude of accounting requirements prevailing in the countries. The burden of financial reporting is lessened with convergence of Accounting Standards because it simplifies the process of preparing the individual and group financial statements and thereby reduces the costs of preparing the financial statements using different sets of Accounting Standards.