Comparative Study of Financial Reporting Standards: IFRS vs. Local GAAP

Abstract

This study investigates the comparative impact of IFRS (International Financial Reporting Standards) and Local GAAP (Generally Accepted Accounting Principles) on the financial performance and transparency of firms. Through a detailed analysis of financial metrics, including revenue, net income, liquidity ratios, asset valuation, and earnings volatility, the study demonstrates that IFRS adoption leads to higher profitability, more stable earnings, and better overall financial performance compared to Local GAAP. The results reveal that firms using IFRS report higher revenue and net income, exhibit lower earnings volatility, and maintain stronger liquidity and capital structure. Furthermore, stakeholder perception surveys indicate that investors, auditors, and analysts perceive IFRS firms as more reliable and transparent, which enhances market efficiency and investor confidence. The study also shows that IFRS offers more accurate asset valuations and reduces discrepancies in revenue recognition, thereby improving financial comparability across firms. However, the study also highlights the challenges of adopting IFRS in emerging markets, where Local GAAP remains prevalent, often due to institutional constraints and lack of adequate training. The findings suggest that while IFRS adoption improves global financial integration, future research should explore the long-term effects of IFRS on firm valuation, market behavior, and capital flows, especially in regions with weaker regulatory oversight.