International Financial Reporting Standards Essay - 4

International Financial Reporting Standards - Essay Example As such, it does not outline an industry specific platform that guides and regulates its style of reporting. The existence of financial reporting standards acknowledged across the global platform, such as IFRS, is important especially to multinational corporations and global companies that operate in different countries across the world, with subsidiaries and interests in countries with different approaches to financial accounting and reporting. Therefore, the existence of such internationally acknowledged reporting standards enables these corporations to consolidate their financial statements, especially when returning the profits from subsidiaries to the parent company. A good example of such a multinational corporation that has overseas subsidiaries is the MacDonald’s Chain of Restaurants, whose mother company is in the united states but is has a global presence with its restaurants located in major markets across the world such as Asia and Europe. Despite the numerous benefits that come about to international corporations with their use and application of the IFRS guidelines, its application is not so efficient as an accounting practice because it acts merely as a guideline and not as a rule, or a principle, which accountants should follow and adhere to when preparing and reporting financial statements. This rule out the possibility of all companies applying these standards in their reporting and preparation of financial statements because there is no legal means of enforcing these standards. The lack of a strict enforcement mechanism makes it very difficult for international companies to apply IFRS principles in accounting. As such, these companies only follow these rules out of choice, especially because they want to achieve a global look, rather than following the formalities. However, if in the event these companies, especially the multinational