Advanced Financial Accounting The Reporting Standards

Literature concerning the various accounting principles used in the US also abounds, making it easier for country C’s accountants and finance heads to access information about these standards.
A disadvantage of this type of accounting standards is that these standards can be quite long and complex. Adopting these standards may cause confusion among country C’s accountants, finance people, and its standard-setting body. This complexity may also lead companies to structure their transactions in such a way as to justify favorable accounting treatment and to eliminate the accountant’s or auditor’s judgment.
The second option is to adopt the International Financial Reporting Standards or IFRS, which is formulated by the International Accounting Standards Board. The IFRS is a “principles-based” set of accounting standards, which “provides a conceptual basis for accountants to follow” (Shortridge and Myring, 2004). The advantage of these standards is that they are short, simpler and “easier to comprehend”. Because of their simplicity, they can be applied to a wide variety of transactions and can be flexible enough to accommodate future developments of country C’s capital market and business environment. The disadvantage of this is that, since IFRS is still considered to be a relatively young set of accounting standards, there’s a lack of educational materials and examples that can be used to enhance the knowledge of country C’s accountants and the financial statement readers, which may lead to misunderstandings and a weak grasp of the IFRS.
The third option contemplates two sets of accounting standards. For its big companies or publicly-listed companies, country C may opt to adopt internationally – accepted accounting standards such as the IFRS or the US GAAP. For those companies that are small and medium-sized and have no plans to go public in the future (or SMEs), country C may opt to develop its own standards or customize the IFRS or the US GAAP.&nbsp.