International Financing Reporting Standards Research Paper

International Financing Reporting Standards - Research Paper Example Although the US is yet to follow suit, there is a growing enthusiasm towards their adoption by the SEC. Such a move will concequently make it mandatory for the organizations to report using these standards. Currently, efforts are underway to implement the international financial reporting standards in the US accounting field. This is in appreciation of the importance of these standards in cushioning global firms in times of economic hardships. Adopting such standards will undoubtedly assist firms in reducing costs associated with financial reporting since the standards are globally acceptable. This will also enhance transparency in financial reporting as well as offer a standard comparison platform on performance. In addition, it will reduce the time taken by most multinational organizations in reporting their financials. Investors will also benefit from this development since information about performance of companies will be available to them in similar standards. This paper seeks to show how effects of globalization and increased market interdependence necessitate the need for all countries to have common reporting standards. In addition, the paper will outline the financial benefits associated with a common reporting standard in the context of international business. Reasons for the adoption of the IFRS by SEC Unification of the world reporting standards Poon (2012) observes that in 2010, the SEC took a stand on the adoption of the IFRS in the US. Citing the advantages of the use of the IFRS for the United States firms, the SEC decided to embark on a plan to ensure that all organizations in the United States adopt the IFRS. The unification of the reporting standards seeks to put the United States in the same accounting standards as the rest of the world. According to Erchinger& Melcher (2007), the world’s capital markets are likely to gain from the convergence of the world financial reporting standards. The quality applied while drafting these standa rds, their comprehensive nature, and the extent of their application are the main reasons why the world hopes to benefit from these standards (Erchinger& Melcher 2007). SEC in determined efforts to protect the interests of the United States investors sought to implement these standards amid stiff objections by some firms. The first attempts to reconcile the standards of the IFRS with America’s GAAPs in 2007, focused on changing the SEC’s policies so as to accommodate the adoption of the IFRS (Erchinger& Melcher, 2007). Preventing investors in economic crisis In the last decade, the American economy suffered one of the worst economic crises ever in its history. The financial sector being the worst hit sector of the economy showed the laxity of the various state agencies in implementing the policies of the country. Several financial organizations in the country were almost shut down while those that survived were faced by a myriad of problems. This crisis helped reveal a number of problems in the financial management in both the public and sector. These problems were closely