The spread of International Financial Reporting Standards (IFRS) across the world has been the biggest single development in accounting over the past decade. More than 100 countries have now adopted IFRS and more are due to follow. But has the move been beneficial for business?
One of the original key drivers for the IFRS system was that it should increase cross-border trade and hence boost the global economy, because investors will be more likely to trust financial information in other countries that they recognise as being based on the same rules.
The move was kickstarted by the Asian financial crisis of 1997–8. This crash showed the weaknesses, in Western investors’ eyes, of a system where accounting standards and corporate governance systems were so different in an important economic region.
Several studies carried out since then have shown encouraging signs that IFRS is helping. ACCA-commissioned surveys of CFOs across Europe, Asia Pacific and the US in 2007 and 2008 showed a majority supporting global standards. But given the scale of the world financial crisis since then, ACCA decided to carry out new research in late 2011 to see if those views had changed.
Investors and CFOs in Asia Pacific, the Middle East, Europe and the US were asked to give their views as to whether, given the crisis, global standards in the form of IFRS had proved to be beneficial or not.
The results were positive. Of particular encouragement to the International Accounting Standards Board (IASB) was that even in countries at different stages of implementation, finance professionals seem positive about the regime.
More than 40% said IFRS had improved access to capital and 25% said it had lowered the costs of capital. Almost half believed it had played a positive effect in increasing cross-border activity. While not overwhelming, these results are a strong vindication given the economic backdrop. In fact, the financial crisis has, if anything, improved perceptions of global accounting standards among both investors and issuers.