question archive Most countries (developed and underdeveloped) in the world have adopted IFRS accounting standards and ISA auditing standards
Most countries (developed and underdeveloped) in the world have adopted IFRS accounting standards and ISA auditing standards
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Most countries (developed and underdeveloped) in the world have adopted IFRS accounting standards and ISA auditing standards. The question is whether every country who has adopted these standards should be strictly held and accountable to the same high standards dictated by each of the two sets of standards or whether underdeveloped countries should be given special treatment or privileges while in development?
What are the advantages and disadvantages of holding them all to the same high-quality standards? Is it fair to developing countries?
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Answer:
Majority of the countries across the globe are following IFRS/IAS reporting. As of now, all the countries are held equally responsible for compliance/noncompliance. However, the need of the hour requires that if any country is an underdeveloped one or is a developing nation the country shall be allowed leverage and certain exemptions and benefits in the generally accepted accounting principles (GAAP) to boost and encourage the overall economic growth of that nation. Moreover, such benefits provide an incentive for the multinational companies to set up their branches and subsidiaries in such zones, thus boosting the economy of such countries.
Advantages if underdeveloped/developing nation held at the same high standards as that of the developed nation:
1) Reduced corruption
2) Higher accountability
3) Healthy competition
4) Growth incentive
5) Faster progress
6) Overcoming social and political problems in addition to an economic issue.
Disadvantages if underdeveloped/developing nation held at same high standards as that of the developed nation:
1) Uneven division of requirements.
2) Misuse of such exemption
It appears to be fair to developing nations as such a benefit shall accelerate the overall economic backdrop of the nation. Additionally, it can help resolve issues of poverty, culture, political scenario etc. Hence, the recommendation shall be to extend the gain to such developing nation.
Examples: Say UK is following IFRS and Israel which is a developing nation wants to adopt IFRS reporting, then there shall be beneficial reporting for the Israel nation in which overall compliance shall be reduced and it will be covered by less reporting and filings.
