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The International Accounting Standard Board (IASB) is known as an independent private sector which created by nine different countries and committee is consists of 14 members (Tiffany Bradford 2007). The aims of IASB is to create an accounting standard for the global capital market, which standard are set to be transparent, understandable, high quality and enforceable in order to help investor to have a better understanding and help them in making decisions, help to converge accounting standard to a higher quality solutions. In this case, these members have created the International Financial Reporting Standard (IFRS) According to "Price Water House Cooper" (2009) the globalization of business and finance has led to the successful mass adoption of International Financial Reporting Standards (IFRS) and it is over 12,000 companies in over 100 countries. This concept was also supported by individual and use of a single set of high quality accounting standards globally or the possibility of moving to use these standards as capital markets become global.
IFRS use in most capital markets around the world because capital market is a more liquid market, so that IFRS accounting standard suitable for use in the capital market. Capital markets is a need to focus to use by IFRS, in capital market they also need to use accounting standard to make their financial statement because they know that using consistent accounting standard globalization have more benefit than using their home country accounting standard such countries as Korea, China, Malaysia and etc. These countries also are intending to swift their home country accounting standard to international financial report standard (IFRS) in the future years. This is making Invertors can easy compare their accounting standard and high quality standard because it is also acceptance by globalization so that investors can make more confidence to use the IFRS accounting standard. Capital market can be separated into two markets, such as equity market and lender market, each market they have own accounting legal system to protect their investor, shareholder and creditor. Each country of the accounting legal System also is different. According C.W.Nobes (1983), there are two laws in the accounting standard of IFRS which can be classified by a nation's legal system, common law and code law.
The common law is based on cases-by-cases and it does not cover all the cases in the all-encompassing code. The case is from English cases law. Irving Fantl (1971) The rules also create independent enforced through litigation. Common laws it present to the financial statement is base on "fair presentations" because it is more transparency, separating the reporting between the tax and financial accounting and more disclosure for the public and it is more protect by shareholder. Professor of Ray Ball (2009) said that, the common laws theory can improve the companies' efficiency to produce timelier financial information to the public. This is because it is threaten to the lawsuits by shareholders or regulators. This encourage the shareholder present the financial statement more-timely and reduce the loss. Common laws have another call by the different country such as 'Anglo-Saxon', 'micro-based', and 'British-American'. They have some country also use for common law to set their accounting standard system such countries as Malaysia, Singapore, Austria, Hong Kong, United state, Canada, and the origin of common laws countries is British. Allan (2008) had mentioned that the GAAP accounting standard also base on common laws standard.
In the traditional accounting system, code law is derives mainly from Roman law and the code Napoleon, these are origin from French law. Code laws are set for the requirement and procedure by the code countries and code law counties is characterized as legalistic in orientation, opaque with low disclosure and financial and tax accounting are alignment. So that the code laws are rely on private information and less market to oriental. A code law also is use the regulation to protect outsider such as creditor and stakeholder. (Roberts.C, Weetman.P, Gordon.P 2002) Accounting is designed to compromise the capital, not the needs of investor (Choi and Mueller, 1992) therefore, most company in the code law based countries are not listed company due to they do not have external investors. Code law countries are a control-oriented society people are not allowed to do what is restricted because code law accounting tends to focus on legal form and accounting standard are presented within law and regulated by the government. Sometime the people call the code laws to another call are 'macro-uniform', 'legalistic', and 'continental'. They have some countries of continental such as Europe, Asia, Americas and Africa; these code law countries are focus their conservation, stakeholder orientation and focus the accounting report is based for tax regulation.
In the word, they have many countries choose to use International Financial Report Standard (IFRS) to prepare the financial statement. They have some reason show that IFRS is benefits for the companies to use it. IFRS is ensuring the financial statement is more transparency than other accounting standard and it is also accepted by global and trading is securities. Companies can improvement their finance system and reduce the cost for the long term, it is can help for the management more efficient to improve their financial work and timely decision for the business when they use IFRS for internal. pricewatercooperhouse (2008) Some of the cross border company can easily understand and compared their financial statement with another company when they consistently adopt IFRS and global company can more easily compare their international financial report standard. But they have some country are not suitable to adopt IFRS accounting standard very well because in the capital market of each country they have different laws to protect their shareholder or stakeholder. For example, IFRS need to more transparency, full disclosure and liquidity, just the common laws have more suitable for their requirement, because common law need the financial statement more transparency, more disclosure for the financial accounting, and the laws is more protect by the shareholder than code laws, code laws is no liquidity because it rely private information, lower disclosure financial report for their shareholder and the law is more protect for their creditors and stakeholder. This requirement show that common laws country can do the IFRS accounting standard more well than code laws countries, and if common laws want to swift their home country accounting standard to IFRS accounting standard it is more easy to work. They have some of the country of the common law and code law countries will plan to adoption IFRS for the future years, because they know use consistent accounting in the global is more benefit than disadvantage. The benefit is investor can more easily understand and compare their financial report they no need to waste time and money to translate their home country accounting standard to another home country accounting standard.
For example, Malaysia is a common laws country; they had adoption international accounting in 1978 but not at all company to adoption the accounting standard. Now they know that if use consistent international accounting report standard (IFRS) it is easy to compare and more transparency in the global capital market. Malaysia will convergent with IFRS in 2012. Dato' Zainal Abidin Putih (2008) They have some countries will convergence IFRS in 2011, such as Korea, Canada, and India. Dato' Johan Raslan, (2008). They also believe that, adoption IFRS it can benefit for the company for the transparency and international investors or cross border company have chance to come over Malaysia to invest. Malaysia also said if one country want accepted by global it should include using consistence accounting standard (IFRS), and Malaysia companies can expansion their business to the global capital market, such as merge or acquisition. This is why Malaysia set for the target of 2020 will become modern country in the word.
Another code law country is South Korea. Korea they had their own accounting standard, but they want to compare their accounting standard to the global was very complexity because they have language barriers and inconsistent accounting standard. Global capital market is a main reason of the Korea country want to adoption consistent accounting standard (IFRS) and it accounting standard also is acceptant by global. They also believe that adoption IFRS can help small and medium company to access global capital market, and they can save more money and time to participant in global such as compare their accounting standard with competitive. They have some system Korea need to change and improvement, such as education of IFRS accounting system, because some of the manager of their company does not how to use IFRS accounting standard, it should give them a training program to improve their skill. Professor Jay Kang (2008) These two country show that, they have their own reason to adoption IFRS, some of the country have their own reason will adoption IFRS such as China, China companies want to expansion their business to the global capital market, so that china is looking for oversea for fund and acquisition. Subsequently china planning will adoption international accounting standard, because it standard can help China's companies accounting standard more transparency and credibility. Cross Boarder Company can easier to compare the accounting standard if cross border company want to invest in China, and another country of their reason to adopt IFRS is Japan. Japan knew that adoption IFRS accounting standard was high quality global accounting standard. Japan companies need to expansion their business to the global capital market because Japan knew this standard was accepted by the global. (Ernst & Young- India 2006) Consistent accounting standard (IFRS) use in the global capital market is more benefit than U.S GAAP. They have one evidence show that SEC also planning swift from GAAP to IFRS. (David Albrecht 2008) Securities and Exchange commission (SEC) also believe that use the consistency accounting standard it is can give all the investors to easy understand the international financial statement and foreign competitors also very easy to compare their financial statement. This is can let US companies to reduce the cost in the future when they use the accounting standard consistently. Switch from US GAAP to IFRS it have more benefit to the US companies and can become part of global economy. PriceWaterCooperhouse (2008) mentions that use the IFRS can positive for their companies credit rating and easy to borrowing money or refunding by the Multi National Company (MNC). For example, if MNC want to acquisition or merger for the foreign company it is more advantage to refund if the company credit rating is good. Investors can more confidence because in the words more countries accept to adoption IFRS and develop cooperation agreement with foreign entities. If all the countries use the different financial standard it is let the accounting standard more complex and investor difficult to understand. Also difficult to compared with their competitor and need to spend more time to know their rule of accounting standard
At above said that, every country had their own reason to adopt International Financial Report Standard (IFRS), but some of the country also have their reason they don't want swift from their home accounting standard or U.S GAAP to new accounting standard (IFRS). They have some of the challenge why they can not swift to IFRS now and some of the IFRS users felt that it had some problem of the fair value measurement when the crisis is happen. The reason is lack of knowledge in the U.S, and some of the GAAP users country they don't know what is the IFRS accounting standard because their education in the college and University were not learn for IFRS accounting system. Their accounting program is teaching GAAP, so all the manager does not use the IFRS accounting system in the U.S. They also don't have a profession of professor to teach the IFRS because they no more experience. (Victoria Erhart 2008) Second challenge is companies in the U.S they used their GAAP information system, if the companies want to swift to IFRS accounting standard they need to change all the accounting system such as information system and internal control. This kind of change is let for the companies inconvenient, the companies may waste for the time, money, want to plan and coordination. The companies also want to retrain their staff to learn IFRS accounting standard. (Luis Cabrera 2008) Another challenge is IFRS users used the fair value measure their property have some problem, for example if you buy a property of $10000, after one years the crisis make the property market price drop to $5000, this current price of loss will record in the balance sheet. The measurement is use for mark to market. Illiquid market is a main point to challenge fair value to calculate the market value.(PriceWaterCooperHouse 2009) This fair value measurement let some companies to complaint their problem and make the company huge losses in the crisis. For example: AXA is a largest insurance company in the France. An AXA company was attack to use fair value to measurement of market price because 2008 financial crisis started all the market price was tumbled especially housing market price; force the bank must record the current price to financial statement. This make the bank to record hundreds of billions dollars losses in the market of asset. Scheherazade Daneshkhu and Jennifer Hughe (2009) said that AXA with French Banks of BNP Paribas was argues that the rules are not suitable when the crisis are become because it is let insurers hold assets to back long term liability, and in the market that show infrequently traded and the market price was bigger moving. This situation become illiquid market started that show the economies will recession.
While the financial crisis is started at 2007, this crisis was let the accounting standard (IFRS) of fair value measurement show some challenge. In the banking of their debt can write down to the profit and loss. The case show that the IFRS fair value measurement have problem for the banking sector, HSBC Chairman Stephen Green (2009) said that accounting standard of IFRS is bizarre. Their own debts let
International Financial Report Standard (IFRS) using in global capital market is more transparency and more disclosure financial report. It is investors and shareholder desires the basis requirement in the financial report because they can more confidence to invest in the global capital market. Investors and shareholder also very scare the financial report have some problem making by the company, because the problem of accounting fraud, insider trading and improper accounting statement issue let them to loss much of money, and made the company collapse. If the international accounting standard can prevent of these problem then the economy is more flourish because no company collapse and employee also no lost their job. I feel that consistence accounting standard to the global it is very important because investors and cross border company can easy to solve their problem when the crisis is come. So, IASB is an important role to harmonization to the global capital market for convergent accounting standard. The 2008 financial crisis the cases was show that, if the consistence adoption IFRS accounting standard will help in lower down the crisis and cut down the company to make accounting fraud and less to make improper accounting statement such as Madoff and Enron cases. International Financial Report Standard (IFRS) using in global capital market it can easy compared their financial statement and transparency. They have six larger accounting firm in the word also will support convergent IFRS for the global capital market and also want to adoption of global convergent audit of independent standard, (Stephen Taub 2008) because consistent accounting standard it can let them to more easy to compare. If all the countries used for different accounting standard were become more complex, no transparent for the financial statement and easy to make an accounting fraud. So that International Accounting standard Board (IASB) is a important role to harmonization convergent International Financial report Standard (IFRS) to the global market because using one single accounting standard used for the global capital market can be make financial statement more transparency and responsiveness to needs for clarity, clear and concise writing in plain language, faithful presentation of economic reality, consistency with a clear conceptual framework, and appropriately-defined scope that addresses a broad area of accounting. (Stephen Taub 2008) Some of the challenges IASB needs to revise the problem of the fair value measurement, then capital market only have confidence to adoption International Financial Report Standard. IASB also need all the countries government support to convergence IFRS because if all the words adoption consistent accounting standard (IFRS) it can prevent some of the problem break up such as accounting fraud and improper accounting statement making and insider trading.