What are the DISADVANTAGES of INTERNATIONAL REPORTING FINANCIAL STANDARDS?

The major disadvantage in the short run will be the cost to businesses of adopting the new standards. For some years into the future, Accountants will have to understand both their own country's "traditional" GAAP (Generally Accepted Accounting Principles) rules, as well as the IFRS (International Financial Reporting Standards). Having to understand two different sets of rules requires extra time and work on the part of accountants, and that costs money.

There will be some inefficiencies (e.g., the cost of changing historical audited financial statements prepared under the old rules, just for the sake of comparability with later year financial results) and resulting extra expense (those accountants have to be paid for all that extra work!) for the company whose financial statements will have to be restated.

The financial markets community, whose members analyze American financial statements, will also have to re-learn how to read the financial statements of U.S. companies under the new accounting rules.

Another disadvantage is related to the fact that under the old rules, the financial statements of companies of a given country were geared to specific user groups. For example, German financial statements were geared mostly toward creditors and potential creditors, while American financial statements were geared toward investors and potential investors. So there will be some users of financial statements who won't find statements prepared under the new standards as useful as those prepared under the old standards. As time passes, this problem will go away as readers of financial statements become accustomed to seeing financial data prepared under IFRS.

The ultimate advantage is that the financial statements of (e.g.) a German pharmaceutical company will be prepared under the same set of accounting rules as those of an American pharmaceutical company, so investors will be able to directly compare the financial statements of the two companies in deciding where to invest in this increasingly global economy.