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Introduction

The global business environment has been becoming increasingly integrated and inclusive, much of which is expected to be due to the global phenomena like that Globalization, commercial liberalization as well as the development of the international business infrastructures and technologies. All these can be seen to be encouraging increasing number of businesses to expand their domain of activities across the globe. Businesses in the recent period not only operate in a global market place but also in an increasingly competitive scenario (Christensen et al. 2015).

All these indicate towards the need for efficiency as well as uniformity in the operations of the businesses in order to make their global operations convenient and in order to reduce confusions. In this context, accounting is one of the most crucial business operations as this deal with the financial aspects, transactions, forecasting and revenue and cost management of a business (Flower 2015). However, the accounting standards of different countries have different traits, which often create confusion for global operations and business transactions between business units situated in different parts of the world. Keeping this into consideration, the International Accounting Standards were developed and later in 2001, replaced by International Financial Reporting Standards, in order to bring parity and uniformity in the accounting standards and rules in every country.

Although primarily developed and implemented in the European countries, the same can be seen to be increasingly implemented in all parts of the globe and especially in different Asian countries in the recent period, owing to their robust economic growth. The report, taking this into consideration, tries to analyze the benefits as well as the costs which are perceived to be existing in implementation of these IFRS rules in the Asian countries.

International Accounting Standards and IFRS: Meaning and Implications

To understand the costs and benefits of implementation of a uniform accounting system internationally for all businesses and especially in the Asian countries, which used to have their own forms and standards of accountings, it is crucial to acquire knowledge about these standards and the features of the same. The International Accounting Standards and their renovated form known as the IFRS have been designed with the aim to provide a common international accounting language to facilitate business affairs among companies across the globe (Perera and Chand 2015). The roots of the same lie in the problem which has often been faced in international business transactions, which is of the confusions created in transaction activities due to difference in accounting standards. The increasing magnitude of international investment and shareholders has also led to the need for the development of such common and uniformly applicable global accounting standards. These accounting languages are expected to be simple, comprehendible and applicable for businesses across the globe.

Features of these international accounting systems

The primary features of these international standards can be seen to be as follows:

·         Fair presentation and compliance- This indicates towards the fair and unbiased representation of all the transactions in accordance to the definitions and the criteria stated

·         Going concern- As per these standards the companies present their financial statements on the basis of a going concern except any intentions of liquidation

·         Accrual accounting basis- This induces the businesses to recognize their assets, equity, income, liability and others with respect to the satisfaction of the definitions of the same set in the standards (Dudin et al. 2015)

·         Reporting frequency- As per the standards, financial statements have to be published by the companies at least once in a year

·         Consistency- There should be consistency in the presentation of the information in the financial statement from one period to another

As per the international standards the financial information of the companies needs to be relevant and faithfully presented and the other characteristics should also include verifiability, timeliness, comparability and comprehensibility. All these aspects can be indicating towards the development of an enhanced quality of accounting standards, in the present period, which is being increasingly implemented in different countries or converged with their own national standards of accounting (Kaya and Koch 2015).

International Accounting Systems in Asian Countries: Scenario in the present period

As discussed in the above section, with the IAS and then the IFRS getting increasingly implemented in different parts of the globe, in the recent period, many Asian countries can also be seen to be increasingly responding to the same. In this case, two main methods of inclusion of these international standards can be seen to be taken by the Asian countries who have been already progressing in this path. The two methods are the following:

·         Convergence- This is the method taken up by some of the countries in which they have integrated the standards of the international accounting systems with their own national accounting systems, thereby creating a comprehensive system having both the characteristics to facilitate both domestic as well as international business transactions

·         Adoption or Divergence- The countries implementing this method have been replacing their national accounting standards with the international ones instead of trying to integrate both of them (Florou, Kosi and Pope 2017)

Asian countries adopting IFRS

In the present period (after 2001), with the IAS getting reformed as IFRS, different countries and jurisdictions can be seen to be implementing these standards across the globe as is evident from the following figure:

In Asia also there are various countries that have been implementing these standards, some of which and their methods are discussed in this section:

a.       Brunei Darussalam- This country has adopted the standards for the public entities but not for the SMEs, for which these standards are used by the auditors for the evaluation of the financial statements

b.      Cambodia- The country has gone in the path of full adoption of the IFRS from 2012. However, the standards have been translated into the national language for better understanding (Joshi, Yapa and Kraal 2016)

c.       Malaysia- The country has updated its national standards for accounting (MFRS) according to the 2010 version of the IFRS, thereby taking the method of convergence and the SMEs are given a choice to choose their version of accounting standards

d.      Myanmar- This country has also adopted the international standards after some minor modifications as per their own business operations and requirements

Apart from these countries, the primary Asian countries like Singapore and Thailand can also be seen to be seen to be taking the method of convergence to incorporate the international standards as well as their own national standards for accounting, in the face of commercial growth. However, there are some countries like Indonesia and Vietnam, who have not considerably converged or adopted the international standards of accounting in their business operations (Felski 2015).

Perceived benefits of the international standards by the Asian countries

There are several benefits that have been perceived by the Asian countries in incorporating the international standards for accounting in their operations. Much of the implementations can be attributed to these reasons. Some of the primary perceived benefits of the same can be discussed as follows:

·         Growth of the commercial environment- The Asian economies can be seen to be growing at impressive pace, with the business environment becoming more liberal and inclusive. This in turn has led to development of commercial and business connections of the Asian economies with rest of the globe and especially with the developed countries like the USA and other European countries (Houqe and Monem 2016). For the ease of doing businesses and increased convenience in transactions and accounting aspects, the need for a uniform and universally accepted set of accounting standards can be seen to be felt in these Asian countries

·         Increasing investment from all parts of the globe- Globalization and the constant technological development have helped in the creation of global market place, increasing the awareness among the global investors regarding the prospective areas of investment in the various emerging economies (mostly the Asian economies) in the present period. However, presence of different accounting standards for different countries led to the creation of confusion among the investors regarding their risks and potential returns of their investments (Ball 2016). Thus, the incorporation of the international standards by the Asian countries is also perceived to be beneficial in the sense that the same encourages the foreign investors to invest in different projects in the country or open businesses in these countries, thereby helping in increasing the inflow of foreign capital

·         Raising capital from the foreign markets- Incorporating the international standards for the accounting operations can also help the industries of the countries to gain confidence of the international investors and the fact that their financial statements comply with those of the globally accepted standards for accounting is expected to make it easy for them to acquire capital from the foreign markets in a much easier and effective way, thereby reducing the cost of acquisition of such capital (Khlif and Achek 2016)

·         Development of skilled professionals- Implementation or integration of the International Accounting Standards in the Asian countries can also be expected to contribute positively in the development of the skills and relevance of the accounting professionals of the country (Abdullah et al. 2015). This in turn is also perceived to be beneficial for them as they can seek and get absorbed in accounting related jobs not only in the country but across the globe due to the fact that their skills and knowledge are in accordance to the accounting practices across the globe

·         Increased chances for attracting foreign skilled professionals- The presence of internationally accepted accounting standards is also expected to help the businesses in the Asian countries to attract talents and skilled human resources in these aspects from all parts of the globe, thereby helping in building the talent pools in the concerned countries

Perceived costs of incorporation of the international standards by the Asian countries

In spite of the presence of various perceived benefits of the incorporation of the international standards in the Asian countries, there also exist several perceived costs of the same, which cannot be ignored. The primary ones, in this context are discussed in this section of the concerned report:

a.       Inherent political nature- One of the primary costs of incorporation of these standards of accounting can be the inherent political nature of the standard-setting processes, which may in turn lead to creation of a partial environment with vested interests (Delcoure and Huff 2015). Thus, it can be a costly process for the government of the Asian countries to design and implement proper monitoring and auditing committees in order to ensure that the incorporation of the international standards are free from the influence of any kind of lobbies or political pressures and also to monitor that these do are in line with the public interests and not for the maximization of the welfare of some sections of the population

b.      Translation of the standards- Not all the countries use English as their conventional businesses in Asia and these include countries like Indonesia, Korea and others. Thus, the issue of translation of the international standards of accounting is prevalent for these countries. This process can be perceived to be costly for the standard-setters as they need to consider the linguistic, psychological and other aspects too (Khoo and Ahmad-Zaluki 2015)

c.       Complex environment for Financial Reporting- The financial reporting environment of various Asian countries are varied and contain different economic, political and legal settings. The regulatory frameworks, corporate governance, responsibilities and power of the editors as well as the legal systems and the accounting enforcement bodies also vary hugely for each of these countries. Keeping these factors unchanged can make it difficult for uniform application of the international standards and changing all these structures can be a substantially costly and time-taking process

d.      Training- The professionals working in these fields in the Asian countries need to be trained, the costs of which have to be borne by the companies as well as the government, thereby adding to the expenses (Wardhani and Anggraenni 2017)

Conclusion and Recommendations

The above discussion indicates towards the fact that integration and incorporation of the international standards for accounting in the Asian countries can have both benefits as well as some costs. However, given the global commercial integration and the development of the economies as well as international trade connections of the Asian countries it cannot be denied that these standards are crucial for long term relevance and sustainability of the business environment and the growth of the same in these countries. Thus, for cost-effective and appropriate implementations of these standards an effective planning and strategic frameworks need to be developed by the government of the Asian countries, in association with various stakeholders in the business environment. Proper training and skill development programs for the professionals are also required in these aspects and the government also needs to develop a monitoring body in order to ensure proper working of the same and also to reduce the negative effects of the contingencies arising out of the same. 

References

Abdullah, M., Evans, L., Fraser, I. and Tsalavoutas, I., 2015, December. IFRS Mandatory disclosures in Malaysia: the influence of family control and the value (ir) relevance of compliance levels. In Accounting Forum (Vol. 39, No. 4, pp. 328-348). Taylor & Francis.

Ball, R., 2016. IFRS–10 years later. Accounting and Business Research46(5), pp.545-571.

Christensen, H.B., Lee, E., Walker, M. and Zeng, C., 2015. Incentives or standards: What determines accounting quality changes around IFRS adoption? European Accounting Review24(1), pp.31-61.

Delcoure, N. and Huff, K., 2015. Determinants of IFRS voluntary adoption in emerging and frontier markets. Review of Business36(1), p.43.

Dudin, M., Prokofev, M., Fedorova, I., Frygin, A. and Kucuri, G., 2015. International Practice of Generation of the National Budget Income on the Basis of the Generally Accepted Financial Reporting Standards (IFRS). Asian Social Science11(8), pp.119-126.

Felski, E., 2015. Do common features exist among countries that locally adopt IFRS? International Journal of Accounting and Financial Reporting5(2), pp.144-177.

Florou, A., Kosi, U. and Pope, P.F., 2017. Are international accounting standards more credit relevant than domestic standards? Accounting and Business Research47(1), pp.1-29.

Flower, J., 2015. The international integrated reporting council: a story of failure. Critical Perspectives on Accounting27, pp.1-17.

Houqe, M.N. and Monem, R.M., 2016. IFRS adoption, extent of disclosure, and perceived corruption: a cross-country study. The International Journal of Accounting51(3), pp.363-378.

Joshi, M., Yapa, P.W.S. and Kraal, D., 2016. IFRS adoption in ASEAN countries: Perceptions of professional accountants from Singapore, Malaysia and Indonesia. International Journal of Managerial Finance12(2), pp.211-240.

Kaya, D. and Koch, M., 2015. Countries’ adoption of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs)–early empirical evidence. Accounting and Business Research45(1), pp.93-120.

Khlif, H. and Achek, I., 2016. IFRS adoption and auditing: a review. Asian Review of Accounting24(3), pp.338-361.

Khoo, C.P. and Ahmad-Zaluki, N.A., 2015. IFRS convergence and earnings management. VOL. 23 (S) MAY 2015, p.75.

Null, S.H.U., 2016. Cost-benefit analysis of IFRS adoption: developed and emerging countries. Journal of Financial Reporting and Accounting14(2), pp.198-229.

Perera, D. and Chand, P., 2015. Issues in the adoption of international financial reporting standards (IFRS) for small and medium-sized enterprises (SMES). Advances in accounting31(1), pp.165-178.

Wardhani, R. and Anggraenni, M.D., 2017. The effect of leverage and IFRS convergence on earnings management through real activities manipulation in Asia. Asian Journal of Business and Accounting10(1), pp.87-125.

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