Executive Summary
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Worldwide convergence on international standards for financial reporting will make investment and financial reporting more efficient.
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Investors gain access to more investment opportunities and the cost of capital comes down.
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As more countries use International Financial Reporting Standards (IFRS), so international groups can use them for subsidiary reporting and group reporting.
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The International Accounting Standards Committee, the international standard-setter, came into existence in 1973 as an initiative by the accounting profession to address the emerging needs of cross-border business.
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The standard-setter negotiated a role with the international co-ordinator of stock exchange regulators as a supplier of rules for secondary listings.
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The International Accounting Standards Board, the successor body, was created in 2000 at the time when the European Union announced it would adopt IFRS for listed companies.
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IFRS are now mandatory or permitted in more than 100 countries. China, Japan, India, Canada, Brazil, and South Korea are set to adopt IFRS in 2011.
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Companies using IFRS can list in the United States without preparing a costly reconciliation of their numbers to US GAAP.
Introduction
How did an internal phone call in a Sydney hotel in 1972 lead 40 years later to a worldwide movement that is changing financial reporting radically and opening up international investment?
Thanks to that conversation, companies can more and more easily access different stock markets, and investors can step across national and cultural boundaries. Investment should be getting more efficient. Since 2001, International Financial Reporting Standards (IFRS) have been set in London by the International Accounting Standards Board (IASB), a privately financed independent body. Their standards are used for listed companies within the European Union and in many other places. In 2011 China, Japan, India, Brazil, and South Korea will start using them. Even the United States is considering abandoning its rules in favor of the international ones.
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