International Financial Reporting Standards (IFRS): Managerial and Financial Accounting

Managerial and financial accounting
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Background
Financial information provides financial information to stakeholders’ mostly external users to facilitate evaluation of past performance. On the other hand, management accounting provides information to the managers who undertake the planning, controlling and decision making functions. Financial accounting information must then adhere to accounting standards while following the prescribed format while preparing financial statements unlike management information that may differ depending on a department needs or company’s operations. Governments, auditors and investors are interested in financial information that is verifiable. Accounting plays diverse roles in society, while international issues complicate preparation of financial statements under different jurisdictions. Accountants may choose the horizontal financial statement model to determine changes how individual items affect the financial statements. The adoption of the Sarbanes-Oxley Act resulting in improved governance and oversight of the financial reporting system.
Role of accounting in society
Technology adoption and globalization have impacted on the accounting profession. To take into account these changes there is a need to assess accurate financial information quickly and easily (Raj & Seetharaman, 2012). As such, accountants provide information to decision makers responsible for planning, implementing and executing operations in organizations. Accounting bridges the gap between the internal and external users of information. The real- time information is then necessary for all users of information who rely on financial details to make decisions (Raj & Seetharaman, 2012). For instance, the government requires financial information for taxation purposes, and the information then needs to be reliable
Accounting relates to the recording, classifying as well as summary of information on transactions with a view of facilitating decision making and control. Societies require accounting information in the planning and control of activities. This is especially for enterprises which rely on the accounting information to budget. Besides the internal use of accounting information for controlling purposes, external users of accounting information also make decisions to determine the financial position of an enterprise and this affects investor confidence. The external users also evaluate how the management has been able to control and plan activities to improve the financial situation of the enterprise or reporting entity.
Accountants record past transactions and protect the public interest through corporate reporting as they address the concerns of creditors and investors. Currently, there has been growing concern that accountants abet crime after accounting scandals involving financial malpractice. Accountants are expected to adhere to the code of ethics as they are professionally responsible for presenting financial information in a true and fair manner. As such, the financial books need to be properly recorded when the internal controls are in place. Even though, the management is tasked with maintaining a strong control system, the accounting system should make it easier to report financial improprieties.
Focus on international issues
The adoption of international financial reporting standards has restored confidence in capital markets, since the standard are applicable in diverse jurisdictions. Nonetheless, the impact of the standards differs depending on the scale of business operations, while the accounting needs of the developed countries differ from those of developing countries. Hence, for the international financial reporting standards to be integrated with the U.S standards there is a need to evaluate the costs and benefits of adopting international standards and challenges in identifying strategies to eliminate differences in reporting (Pearson, 2014). The key issue to the success of adopting international reporting standards is the extent to which the facilitate comparability regardless of global boundaries
Convergence between the GAAP and IFRs is one of the issues that concerns American organization operating internationally given the need to ensure comparability and consistency (Pearson, 2014). Both the Financial Accounting Standards Board (FASB) and International accounting standards (IASB) have sought to ensure that there are coordinated efforts to address concerns on standards setting that take integrate international accounting standards in the Accountancy. The cross-border capital markets activities have increased the calls for convergence, as users of financial information require clarity about the financial reporting process. Reducing differences in financial reporting standards is one of the aims of FASB to ensure there is better comparability.
In the international context financial information that is reliable and transparent is a concern as more companies engage in international business. Other than globalization, technology advances and regionalization have had a direct impact on the accounting profession. Globalization has increased international capital flow, and there is a challenge to harmonize accounting standards, especially in the emerging markets. In most cases it is the multinational and transnational companies that have to deal with challenges to adhering to international financial reporting standards, but the small–medium-sized enterprises. Customers, investors and the suppliers may be from other countries, and hence accountants need to take into account financial reporting requirements in different jurisdictions including remitting tax
Preparing financial statements
In the preparation of financial statements, the management is tasked with ensuring that they present a true and fair view of the financial position, while also taking into account ...