For many companies, especially those that have multinational operations, complying with International Financial Reporting Standards (IFRS) is synonymous with extra workload. Whether the company has already begun the adoption process or are bracing themselves for a major change, they should know that IFRS, in fact, are not as scary and daunting as they seem. Businesses should develop a mindset that faciliates IFRS transition by understanding key benefits of IFRS. The two primary groups that can benefit from IFRS adoption are:
Investors and investment institutions
With IFRS in place, investors get greater financial and operational transparency so they can more accurately compare the health and performance of one company with that of others, and, as a result, make better fact-based investment decisions. If a business can convey a promising outlook, the pool of potential investors and lenders will expand.
After implementing IFRS, businesses will be able to measure their operations and company finances more precisely, setting the stage for improved business performance. They will also gain better insights into the operations of their competitors, customers, and partners as they make the transition. Some specific benefits of IFRS compliance include:
- Improved financial reporting and tax planning: Under IFRS, companies will produce a standardised and consistent set of accounting and financial reports for complying with local statutory and consolidated requirements. This will help improve the analysis of financial reporting and tax planning processes.
- Improved day-to-day operations: Businesses will get faster access to more in-depth financial performance information to use in analysing and making better decisions about day-to-day operations.
- Better managed resources: By standardising processes and accounting, companies will be able to standardise and streamline accounting systems across the enterprise and reduce the cost of auditing and statutory reporting.
- Improved financial controls: By standardising the approach and control over statutory reporting, businesses will reduce the risk of penalties and compliance problems enterprise-wide and in individual countries.
- Lowered cost of capital: Increased insight into financial results and adherence to high-quality financial standards, as specifed by IFRS, can benefit both companies and their investors with reduced cost of capital.
After contemplating the benefits of IFRS, the next step for businesses is to understand what changes are expected in preparing their financial statements as well as considering how they should approach the IFRS transition. Find out more in the whitepaper “Adopting IFRS: A challenge for some. Well worth it for everyone.”