Question

2.) Since 2005, publicly traded companies in the European Union have been required to use IFRS in preparing their consolidated financial statements. a.) Explain the EU’s objective in requiring the use of IFRS. b.) Identify and describe 2 issues that might hamper the EU from achieving the objective underlying the use of IFRS.

Answer 1

Answer:

a) The EU is trying to set a common standard so that financial statements prepared by businesses from different countries can be comparable.

b) There are several problems with IFRS being used in the EU including:

IFRS are written in English, and only the UK and Ireland are English speaking countries in the EU (and soon only Ireland will remain). That may cause certain confusion with terms that are no properly translated or mean different things in different languages.  

In many new members (former communist countries) there might not exist an adequate accounting infrastructure to carry out reforms.