As organizations continue to grow and become more complex, those with locations across the globe have increasingly considered adopting the International Financial Reporting Standards (IFRS).
IFRS continues to gain traction and has become a standard accepted across the world with formal commitments from 160 countries and jurisdictions. Here are some of the top reasons why IFRS has become so popular for manufacturers:
- Reporting Consistency – IFRS provides global organizations with a single set of accounting standards making management of foreign locations easier and aligning financial reporting with global best practices.
- Smoother Consolidation Process – All entities under a consolidated group must follow the same application of the IFRS accounting policies. This eliminates a large pain point for many entities as the policies become consistent throughout the globe. The risk of errors in the reporting process is also reduced as all accounting team members are following and are familiar with the same standards.
- Cost Savings – With one single set of statements, entities can save time and money by avoiding the preparation of multiple sets of financial statements under various local standards.
- Consistent Inventory Costing – With all entities following the same application of accounting standards, costing methods for inventory become uniform throughout the organization. IFRS also provides more flexibility than many local Generally Accepted Accounting Policies (GAAP), including U.S. GAAP, as it permits the recovery of inventory write-downs if circumstances change.
- Improved Management Process – Consistent standards across an organization provides more timely information for the group management to track trends and adjust on an ongoing basis. Management can also shift resources more effectively as all team members follow the same accounting standards.
- Access to Capital – Manufacturers can find it difficult to access capital with financial statements prepared under certain local GAAP standards. The adoption of IFRS can make it easier for manufacturers to access capital as these standards provide a high level of reporting.
- Investor Relationships – The more transparent and comparable financial information provided by the IFRS standards allows entities better communication with investors and helps build confidence in the organization.
- Improved Comparability – IFRS statements are utilized across the globe. Statements prepared under this standard are easy to compare to other organizations and industries.
- Improved Internal Controls – IFRS allows manufacturers to apply consist, high-quality control processes which enhances visibility of activity throughout the organization and can reduce the risk of fraud. This implementation can significantly improve the overall risk management process.
- Support for Long-term Growth – The IFRS standards provide high quality accounting policies and statements that can be applied consistently over time to support long-term growth and sustainability of the organization.
Think an IFRS conversion could be a solution for your organization? We can help! Schneider Downs provides assurance, tax, and advisory services for international organizations under IFRS. For more information concerning international business matters and their impact to your organization, please visit the Schneider Downs Our Thoughts On blog or email us at [email protected].
About Schneider Downs International Services
The Schneider Downs International Services industry group is a dedicated team of professionals specializing in serving international companies. Schneider Downs helps clients take full advantage of all their international opportunities and can reach you and your business, no matter where you’re located around the globe. Â
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