Large company advantages
Depending on the circumstances of the company, a multinational should benefit from a number of cost savings when using IFRS. As discussed, there should be a reduction in the cost of capital based on the fact that very many investment managers now know and understand the use of IFRS. Consequently the company that wishes to reach a wider group of investors will find IFRS statements accepted in all major markets.
In terms of secondary listings, the use of IFRS will indeed fulfil IOSCO’s aim of providing financial statements that stock exchange regulators will accept to support foreign listings. In particular, the SEC in 2007 abandoned the 20F reconciliation for companies that prepared IFRS statements. This means that non-US companies using IFRS can have a New York listing without providing US GAAP information – something that AXA, the French insurer, estimated to cost it in the region of $20m in 2006.
Not all companies want a US or other foreign listing, but some chief financial officers (CFOs) consider that going to a large market enables them to raise capital more cheaply. There is also the argument that a foreign listing also carries with it a lot of publicity in that country and is much cheaper than the equivalent advertising. Bay & Bruns (2003, 386–387) say:
The decision to establish or expand a presence on a foreign capital market allows a company to extend its position as a global financial player as well as to underline its commitment to that foreign ...