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IMPLICATIONS OF ADOPTING IFRS IN ASEAN COUNTRIES
Executive Summary
Presence of a standard accounting system is very important for enhancing transparency in presentation of financial statements of different companies across the globe. The report deals with the impact of adoption of IFRS in South Asean countries. Initially the concepts of IFRS have been discussed followed by the advantages and disadvantages of adoption of IFRS across the globe. The effect of adoption of IFRS in ASEAN Countries like Singapore, Indonesia and others has been discussed in detail. The critical reasons behind delay in adoption of IFRS has also been touched upon for imparting due information to the readers of the report. In addition to that, the level of adoption of IFRS in ASEAN countries has also been briefly discussed.
Table of Contents
Executive Summary    2
Introduction    4
Concept of IFRS    4
Advantages and Disadvantages of adoption of IFRS    5
Effects of IFRS on business    5
Reason behind delay in adoption of IFRS    6
Level of Adoption of IFRS in ASEAN countries    7
Impact of adoption of IFRS in ASEAN countries    8
Conclusion    9
References    10
Introduction
With the advent of globalisation, organisations are functioning beyond the physical boundaries in scope for more business across the globe. The accounting practices vary from country to country across the globe. This creates a barrier for organisations operating across the globe. Since the past, various institutions have been taking steps to standardise accounting practices across the globe to reduce the financial barriers in global operations. The decrease in financial boundaries/barriers increases the ease of operations for global companies. With the establishment of the International Accounting Standards Committee (IASC) in 1973, the first step for standardising the accounting practices was taken.
IFRS (International Financial Reporting Standards) are accounting standards issued by the (IASB) International Accounting Standards Board. The overall objective of setting up the standards is to increase the transparency and ensure ease of comparability of the financial statement of various entities across the globe. Adoption of IFRS across the globe has been on the positive side as firms having global operation tend to adopt such standards for standardised reporting. This report discussed the adoption of IFRS in ASEAN countries. ASEAN (Association of Southeast Asian Nations) is an organisation having 10 countries as members working towards economical, political and other developmental aspects of the member nations. Currently Indonesia, Thailand, Malaysia, Singapore, Philippines, Vietnam, Cambodia, Myanmar, Laos and Brunei are the members of ASEAN.
Concept of IFRS
According to the views of Joshi, Yapa, P.W.S and Kraal (2016), IFRS are the common set of rules to ensure preparation of transparent, consistent and standardised financial statements across the globe. These are basically reporting standards to be adopted by organisations to ensure that the financial statements can be understood by the stakeholders across the globe. IFRS has an impact on the presentation of the financial statements and lack of knowledge among the accountants may lead to non-adoption of these reporting standards. Adoption of IFRS affects the balance sheet, profit and loss account, statement of changes in equity and statement of cash flow. There is a difference between IFRS and GAAP (Generally Accepted Accounting Principles). There exists a certain difference in accounting policies among both GAAP and IFRS. Therefore, certain countries that adopt IFRS do not adopt GAAP and vice versa. According to the perspective of Damayanti (2019), IFRS was first used in European Union and therefore spread across the globe. However, countries like AMerica and others do not prefer using IFRS and hence they have shifted to GAAP. The main goal of IFRS is to increase the ease of comparability of financial statements across the globe. Due to the existence of different accounting practices across the globe, there are issues in easy comparison of financials of different companies of different regions. In such cases, IFRS seems to be a good solution.
Advantages and Disadvantages of adoption of IFRS
As commented by Yousefinejad et al. (2018), there are multiple advantages and disadvantages of adoption of IFRS such as it leads to creation of a single set of accounting standards to be followed across the globe thereby increasing transparency and comparability of financial statements across the globe. There will be a reduction in time, efforts and resources involved in preparation of multiple reports for local and global stakeholders. A single report in a standard format will be more than sufficient to meet the purpose of the stakeholders, both local and global. Monitoring of fireign subsidiaries will also become easier after adoption of a standardised set of accounting rules across the organisation, irrespective of geographical location. This will enable the managers to take quick decisions as the same data will be available with all the managers across the company. IFRS offers more flexibility in accounting policies thereby, making it easier for the reader of the financial statement to interpret the data. An increase in transparency makes it viable for the organisation to operate globally without any fear of manipulation because of local accounting policies. As the accounting rules are the same across the company, the manipulations at local level can be traced with ease. From an audit point of view, it is easier for global auditors like Water Partners and others to conduct a systematic audit due to standardised presentation of financial statements across the globe.
According to the views of Putra and Mita (2019), between 2004-2006, more than 70% of companies...