4 The transition to International Financial Reporting Standards (IFRSs) involves

4 The transition to International Financial Reporting Standards (IFRSs) involves major change for companies as IFRSs

introduce significant changes in accounting practices that were often not required by national generally accepted

accounting practice. It is important that the interpretation and application of IFRSs is consistent from country to

country. IFRSs are partly based on rules, and partly on principles and management’s judgement. Judgement is more

likely to be better used when it is based on experience of IFRSs within a sound financial reporting infrastructure. It is

hoped that national differences in accounting will be eliminated and financial statements will be consistent and

comparable worldwide.

Required:

(a) Discuss how the changes in accounting practices on transition to IFRSs and choice in the application of

inpidual IFRSs could lead to inconsistency between the financial statements of companies. (17 marks)

(a) The transition to International Financial Reporting Standards (IFRS) involves major change for companies as IFRS introducessignificant changes in accounting practices that often were not required by national GAAPs. For example financial instrumentsand