How Capital Market Benefit From The IFRS

How Capital Market Benefit From The IFRS

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Introduction

                     The idea of having a global world’s capital markets has resulted in a need to have one set of accounting standards that can be used all over the entire world managed by international financial reporting standards(IFRS). These rules are supposed to enhance transparency of financial information as well as comparability for investors, which in turn leads to a willingness of investors to invest everywhere, more efficient allocation of resource in the economy, higher economic growth and a lower cost of capital (Armstrong, 2010).

                                1. Benefits of IFRS to the capital market.

                One of the main advantages of IFRS is found vividly in its vision to have a single worldwide set of standards that would permit investors from anywhere around the world to benefit from the best quality in the financial reporting. These come to counter attack the existence of the difference in the accounting standards across the nations in the entire world which have resulted in a reduced quality of the accounting information and probably its relevance. Moreover, the transparency exhibited by the firms registered under the IFRS has significantly improved, and this has attracted many investors into the market segment and hence increased capital market (Armstrong, 2010).

                              2. The peer posts

                 The first peer post gives an account from the journal provided by Brochet who discussed the effect of IFRS adoption in the capital market enhancement. It states that the benefit comes. As a result accessibility of information and thus allowing the users to compare the financial statements. The second peer post talks imperatively the same issue, but he comes with something different that the benefits comes from an improvement of comparability of financial information and thus reducing the insiders the ability to enjoy a company’s secret information.

                                                Work cited

Armstrong, C. S., Barth, M. E., Jagolinzer, A. D., & Riedl, E. J. (2010). Market reaction to the adoption of IFRS in Europe. The accounting review, 85(1), 31-61.