Benefits of IFRS Essay

IFRS get out enable US shore to compete globally more than one hundred countries in the world are already using IFRS. This is beca delectation more than sixty percent of investors in US operate foreign stocks with foreign lodges and other companies which use IFRS. Therefore, if US wedge fail to switch to IFRS, transparency and comparability pass on reduce for US issuers and investors (Silver, 2009). Furthermore, US exchanges such as the NYSE flip been gradually losing their position as the place where worldwide companies list their shares.This being the case, the US bank has been affected since foreign investors now prefer commit their wealth in other banks where the accounting standards are not as strict is in the US. To avoid losing investment opportunities and lagging behind the flow developments in the field of accounting, US bank does have to switch to IFRS. study the yearly report of Rabobank with that of Wells Fargo bank shows how IFRS reduces financial reporting into small and less complicated documents.The 2009 annual report of Rabobank were complied in a 61 (Rabobank, 2010) pages document while that of Wells Fargo were documented in 196 pages (Wells Fargo, 2010). This implies that IFRS summarizes financial reporting more than thrice of the generally accepted accounting principles accounting standards. It is too evident from the annual reports of the two banks that IFRS provides more comprehensive historical in initializeion regarding the performance of the bank over the past five years(the case of Rabobank) while generally accepted accounting principles plainly gives the present and previous years figures.This makes IFRS more effective since the stakeholders, concern and investors can be able to track the financial position of the bank at a glance so that which is very important for upcoming palming (IASCF, 2009). Adopting IFRS ordain make reporting for most banks in US easier since it leave alone reduce the difficultities of co mparing financial statements from different subsidiaries across the globe.It will also facilitate internal consistency and streamline all operations, auditing, reporting standards, instruct and company standards (Articles Base, 2009). For instance, Rabobank applies IFRS on its financial reporting. This has greatly improved the efficiency of the bank since it operates in more than forty countries around the world. Following the banks annual reports since 2004, the total net profit calculated using IFRS was higher(prenominal) by 15 million Euros as compared to the same when calculated with GAAP (Rabobank Nederland, 2005).This difference was majorly due to the benefits of reclassifications of interest income under IFRS. This is because under the IFRS accounting standards, several(prenominal) interests are no longer consolidated and this results to lesser third-party interests (Rabobank Nederland, 2005) Disincentives of adopting IFRS IFRS accounting standards are less detailed as compa red to GAAP GAAP is more complex and based on rules while IFRS is based on principles.Adoption of IFRS will reduce the quality of financial reporting because most of the rules applied for GAAP have been let-out in IFRSwhile IFRS principles fit in a sensation two-inch thick script, GAAP standards fit in a nine-inch thick bookthis indicates that the details and reporting requirements of IFRS are fewer and compressed (IASCF, 2009). Adoption of IFRS implies that banks will incur additional costs training staff on IFRS standards and also initial conversion costs which will be paid to advisors and auditors (Articles Base, 2009).Considering the format of the annual reports of the two banks, it is evident that IFRS eliminates many items from the annual report and presents just now the consolidated financial position of the bank. Information eliminated from Rabobanks 2009 financial reports allow the vision, mission and goals of the organization, financial reviews, the report from indepen dent registered public accounting profligate and reports on stock performances however this information is provided in Wells Fargo 2009 annual report.