The enormous success of International Financial Reporting Standards (IFRS) in becoming globally accepted accounting standards leads to challenges in the future. The purpose of this paper is to outline challenges that arise from political influences and from the pressure to sustain a successful path in the development of standards. It considers two strategies for future growth which the International Accounting Standards Board (IASB) follows: the work on fundamental issues and diversification to private entities.
The development of IFRS is discussed and evaluated against insights gained from accounting theory. In particular, results from information economics illustrate potential difficulties of the development of a new conceptual framework for international accounting standards.
The main findings are: the growth strategies adopted by the IASB are risky; the conceptual framework does not sufficiently take into account the diverse objectives of financial reporting; stewardship, prudence, and aggregation can be desirable characteristics of accounting information; and standards that are developed for listed companies need not be well suited for private entities.
The paper suggests that skepticism is warranted about the viability of a consistent framework that applies globally, and that there are benefits to constrained competition among different standards.
The paper reviews academic research that has implications for standard setting and identifies key issues in developing global accounting standards.
