Judul : Reasons for the Need for Convergence to IFRS
link : Reasons for the Need for Convergence to IFRS
Reasons for the Need for Convergence to IFRS
So far, Indonesian people use SAK (Financial Accounting Standards) made by IAI (Indonesian Institute of Accountants), both in learning studies in the field of Accounting and in everyday practice. But now SAK is starting to experience a shift with the entry of a new standard called IFRS. And now, Indonesia itself has begun to adapt the IFRS standard.IFRS (International Financial Reporting Standard) is a guideline for preparing financial reports that are globally accepted by the IASB (International Accounting Standard Board). If a country uses IFRS, it means that the country has adopted a globally applicable financial reporting system that allows the world market to understand the financial statements of companies in that country originating.
The aim of IFRS is to ensure that the interim financial statements of companies for the periods intended in the annual financial statements contain high-quality information that:
Produce transparency for users and can be compared throughout the period presented,
Provides an adequate starting point for accounting based on IFRS,
Can be generated at a cost that does not exceed the benefits for users.
According to the DSAK, adoption of IFRS can be divided into five levels:
Full Adoption at this level a country adopts all IFRS and translates word by word
Adapted to adopt all IFRS but adapted to conditions in a country.
Piecemeal, a country only adopts a portion of IFRS numbers, i.e. standard numbers or certain paragraphs.
Referenced, the standard applied only refers to certain IFRS with languages and paragraphs that are compiled by the standard body.
Not adoption at all, a country does not adopt IFRS at all.
Indonesia has not fully implemented this IFRS because in adopting IFRS there are many problems that must be faced. The following are the problems faced in implementing and adopting IFRS:
International Standard Translation
Mismatch of International Standards with National Law
Structure and Complexity of International Standards
Frequency of Change and Complexity of International Standards As an example IFRS emphasizes fair value and leaves historical value.
Meanwhile there are constraints to convergence which usually arise over several issues of accounting and financial reporting such as:
1. Recognition and measurement:
· Financial assets and derivative financial instruments,
· Impairment losses,
· Provisions,
· Employee benefit liabilities,
· Income taxes;
2. Accounting for Business Combinations
3. Disclosure of:
· Related party transactions,
· Information segment.
Although there are various problems or obstacles to adopting IFRS, a large number of companies voluntarily adopt International financial reporting standards (IFRS). Many countries have adopted IFRS as a whole and used IFRS as a basis for national standards. This is done to answer the requests of institutional investors and other users of financial statements.
IFRS is the answer to standard requirements that can be compared with other countries, Indonesian SAK is a local SAK that is difficult to compare with other countries' IFRSs.
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