international standards of accounting and reporting

As this Group of Experts has underscored on many occasions, principles-based, high quality financial reporting
standards are critical for the coherence and efficient functioning of the international financial architecture. A
rapidly globalizing world economy needs global accounting, reporting and auditing standards. In a world economy
that has been growing increasingly interdependent, resource mobilization and allocation has been taking place
across borders. In the second half of this decade, we have witnessed the transformation of the financial reporting
landscape. An unprecedented number of enterprises adopted International Financial Reporting Standards as the
basis for the preparation of their financial statements.
The centrality of reliable and comparable information for financial stability and investors' ability to assess risk and
allocate resources to different investment opportunities has been painfully demonstrated by recent events. The
global financial crisis has shown how - in a world of unprecedented financial interdependence intransparent
financial market products and financial accounts can wreak havoc not only with investors' profits, but - more
importantly -with the development prospects of innocent bystanders, including some of the most vulnerable
populations.
At the heart of this crisis are problems with opacity and complexity, while financial institutions may have been
reportrng a lot of information, the question was whether or not those reports provided any meaningful insight or
useful understanding of the companies' inherent risks. With hindsight, the answer is clearly no. It is now evrdent
that even the boards of leading banks and their own accountants and internal auditors did not fully understand
the risks of their own products. Ultimately, regaining investor confidence will once again require full transparency,
better accounting, reporting and auditing standards and practices. The current crisis has prompted a re-
examination of several accounting, reporting and audittng requirements -- including consolidatron of off-balance
sheet ent~ties, fair value or mark-to-market valuation of f~nancial instruments and related uncertainties. I
understand that in light of the current crisis, standard setters have taken actlon to amend relevant standards . . .

Questions
1. What are international financial reporting standards (IFRS)?
2. Many concerns are expressed in this article. List three factors that you think are causing concern about
the impact of adoption of IFRS.
3. Consider each of the three factors you mentioned in response to question 2. Is there empirical evidence
to support the factor?
4. Is the analysis leading from the factor to the concerns about adoption of IFRS scientific or naturalistic in
its approach? Explain your answer.
5. What role can normative theory play in resolving the issue(s) described in the article?