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ACCA Applied Knowledge · Financial Accounting · The regulatory framework

Which of the following is a recognised benefit of convergence of national accounting standards with IFRS Accounting Standards, and which is NOT a benefit?

Convergence makes it easier to compare companies across countries, simplifies group reporting and supports international capital raising. It does not remove the need for professional judgement, because IFRS remain principles-based, nor does it make profits identical or eliminate national tax differences.

  1. ABenefit: easier comparison of companies across countries; not a benefit: elimination of the need for any professional judgementCorrect
  2. BBenefit: elimination of the need for any professional judgement; not a benefit: lower cost of preparing group accounts
  3. CBenefit: guaranteed identical profit for all entities in the same industry; not a benefit: improved comparability
  4. DBenefit: removal of all national tax differences; not a benefit: easier raising of international capital

Explanation

Convergence improves comparability, eases consolidation of overseas subsidiaries and helps entities raise capital internationally. It does not remove the need for judgement, since IFRS remain principles-based. The other options attribute benefits that convergence cannot deliver, such as identical profits or the end of tax differences.

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