International Accounting Standards Board (IASB) – do multinationals comply?

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International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that’s becoming the global standard for the preparation of public company financial statements. 

And when it comes to a multinational corporation it is one that has facilities and other assets in at least one country other than its home country. Such companies have offices or factories in different countries and usually have a centralised head office where they coordinate global management. 

Activities of MNC include:   

  • Importing and exporting goods and services 
  • Making significant investments in a foreign country 
  • Buying and selling licenses in foreign markets 
  • Engaging in contract manufacturing permitting a local manufacturer in a foreign country to produce their products 
  • Opening manufacturing facilities or assembly operations in foreign countries 
Therefore a multinational corporation does comply with IASB as 
  • It can present its financial statements on the same basis as its foreign competitors, making for easier comparisons.  
  • Furthermore, companies with subsidiaries in countries that require or permit IFRS may be able to use one accounting language companywide.  
  • Companies also may need to convert to IFRS if they are a subsidiary of a foreign company that must use IFRS, or if they have a foreign investor that must use IFRS.
  • Companies may also benefit by using IFRS if they wish to raise capital abroad.
  • With the capital markets worldwide investors are provided with information that is comparable by complying with IASB.