IFRS and XBRL: How to improve Business Reporting through Technology and Object Tracking

CHAPTER TWO

How important are IFRS to business and global acceptance?

FOR YEARS, LEADERS IN WORLDWIDE CAPITAL MARKETS as well as the US capital markets were anxious to develop a global set of financial reporting standards to improve the comparison of international financial data. In recent years, this effort has accelerated as investments by US investors increased significantly. The US capital markets include thousands of US firms that invest in non-US companies, either through acquisition or direct investment. As such, millions of individuals and trust funds invest in non-US companies, either directly or indirectly, through investments in mutual funds. Generally, hedge funds are made up of international investments. Furthermore, there are approximately 1,000 foreign private issuers that file with the Securities and Exchange Commission (SEC).

In the so-called preface to IFRS, the IASB sets out its mission and objectives, the scope of IFRS due process for developing IFRS and interpretations, and policies on effective dates, format and language for IFRS. In particular, the IASB's objectives are:

a) to develop, in the public interest, a single set of high-quality, understandable and enforceable global accounting standards that require high-­quality, transparent and comparable information in financial statements and other financial reporting to help participants in the world's capital markets and other users make economic decisions;

b) to promote the use and rigorous application ...