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IN A world where capital flows increasingly shape the fortunes of developing economies, the importance of transparent and comparable financial statements cannot be overstated. International accounting standards, when properly applied, can help countries attract foreign investment, bolster financial credibility and unlock economic potential. But while the global move from International Accounting Standards to International Financial Reporting Standards is often framed as a technical evolution, it is in fact a paradigmatic shift that alters the nature of accounting itself. The change has implications not only for investors and multinational firms but also for the integrity of accounting as a discipline. The dominance of financial reporting over the broader, more nuanced field of accounting needs to be questioned — both on grounds of intellectual rigour and institutional consequence.

To begin with, it is essential to recognise that financial reporting is but a subset of accounting. The domain of accounting encompasses far more than just the preparation of financial statements. At its core, accounting involves the identification and measurement of transactions — a creative and interpretive process far removed from the largely clerical task of disclosure. Determining depreciation methods, valuing inventory, recognising revenue, estimating doubtful debts — these are fundamental areas where judgement and principle must be applied. These activities precede and shape what is ultimately reported. Financial reporting is, in effect, the post-mortem phase of accounting; the real intellectual effort lies upstream. Accounting principles such as prudence, matching, objectivity and capital maintenance are rooted in this process of identification and recognition. Even Frederick Hayek’s capital maintenance theory underscores the importance of recognising potential expenses and losses before they become visible in statements. To overemphasise reporting is to risk mistaking the output for the process — and to ignore the creativity, conservatism and foresight required in accounting practice.

Indeed, accounting inputs — the recognition and valuation of transactions — shape the quality of financial outputs. While the International Financial Reporting Standards governs the structure and disclosure of financial statements, it is the underlying accounting assumptions and calculations that lend them accuracy and meaning. Errors in the identification or valuation stage will inevitably distort the final reports, regardless of how meticulously they are presented. Herein lies the problem: IFRS, despite its claim to comprehensiveness, is more concerned with presentation than interpretation. While financial statements may now be more uniform and investor-friendly, their foundations risk becoming brittle when removed from the rigour of accounting standards. The shift from International Accounting Standards to International Financial Reporting Standards —presented as technical and procedural — has turned out to be philosophical and strategic. And yet, its implications are often under-analysed.

The history of this shift further illustrates its layered complexity. During the 1960s and 70s, accounting institutes across the UK, US, Canada, Ireland and Scotland collaborated through the Accountants International Study Group, eventually leading to the formation of the International Accounting Standards Committee in 1973. IAS flourished through this collaborative structure, with the International Federation of Accountants — formed in 1977— playing a pivotal role. International Accounting Standards served the profession for decades until International Financial Reporting Standards formally replaced it in 2001 under the newly established IFRS Foundation. Interestingly, IFAC raised no major objections to the name change. It remains notable, however, that all other connected bodies — such as IASC, IASB, IPSASB — continue to bear the nomenclature of ‘accounting’ rather than ‘financial reporting’, pointing to an unresolved tension in what these standards are fundamentally meant to do.

As of 2022, there were 41 IASs and 16 IFRSs, with clear differences in thematic emphasis. IASs have largely focused on core accounting concerns — inventory, tax, impairment, provisions — while IFRSs lean heavily towards financial constructs like share-based payments, leases, and fair value instruments. Yet structurally, the two remain aligned in having shared frameworks for scope, definitions, recognition, and disclosure. What has changed more dramatically is not the content but the custodianship. Today’s IFRS Foundation and its standard-setting body, the International Accounting Standards Board, are increasingly populated by professionals with finance backgrounds. A look at the board composition tells a revealing story: few are mainstream accountants. Chairs and members include political science graduates, capital market directors and equity managers — competent individuals no doubt, but not necessarily steeped in the epistemology of accounting. The shift in intellectual leadership from accountants to financiers reflects, and reinforces, the rebranding of accounting standards as financial instruments.

Moreover, this changing landscape is not just philosophical — it is institutional and financial. The IFRS Foundation, with assets of £38 million as of 2022 and funding drawn largely from global financial institutions, commands a larger budget and wider influence than IFAC, which stands at £26 million funded mainly by accounting bodies. Unsurprisingly, the body with deeper pockets and more diverse patrons exercises greater sway. Institutions such as the World Bank and European Commission are key IFRS donors. In contrast, IFAC relies on professional accounting associations — many of whom are, in turn, subordinate to state regulators or finance ministries. Audit fees, licensing frameworks, and policy dependencies often leave accounting bodies in developing countries unable to challenge the hegemony of IFRS. The alignment with IFRS may be less a mark of consensus and more a sign of institutional submission.

The consequences of this shift are not merely academic. Eleven IASs have already been replaced or superseded by IFRSs, with more likely to follow. The IFRS Foundation has made it clear that it will no longer issue IASs, suggesting a full phase-out is underway. Yet, many of these replacements are cosmetic. In some cases, the new IFRS carries the same title as the old IAS, merely rebranded. Such moves suggest a strategy of market differentiation rather than technical necessity. The logic seems commercial: to reinforce IFRS as a proprietary product of the IFRS Foundation, supported by its growing staff — up from 160 in 2021 to nearly 300 by 2024 — and expanding infrastructure, including a move from IASC’s modest 4,600 square foot office to the IFRS Foundation’s current 11,000 square foot facility in London’s Cannon Street.

The underlying motivation appears more expansionist than reformist. IFRS is being positioned not as a technical improvement upon IAS, but as a dominant paradigm with global reach, underwritten by financial stakeholders and regulators. In doing so, it inadvertently sidelines accounting scholars and practitioners whose discipline created the foundations for financial reporting in the first place. If this trend continues unchecked, accounting may find itself reduced to a function of financial compliance, rather than a robust, interpretive field of inquiry. The cost is not just academic prestige — it may involve a real loss of depth and judgement in financial analysis itself.

In the end, the global standard-setting regime must ask itself a difficult question: what is gained by diminishing the legacy and rigour of IAS in favour of a more finance-oriented IFRS model? And who bears the cost? Accounting as a discipline is being intellectually and institutionally marginalised. Financial reporting is now often viewed through the lens of capital markets, rather than business sustainability or prudential management. And yet, professional bodies — caught between financial dependency and regulatory pressure — have offered little resistance. The burden of this shift is ultimately borne by the global business community, which pays higher compliance costs to two parallel institutions (IFAC and IFRS Foundation) that were originally intended to serve a common purpose.

The global accounting community must reflect on whether the IFRS regime, as currently structured, sufficiently honours the breadth of accounting principles. Replacing a discipline with a disclosure framework may win favour with investors and institutions in the short term, but in the long run, it risks diluting the very standards it seeks to uphold. Accounting deserves more than a footnote in financial reporting. It deserves its rightful place as the foundation upon which reliable, prudent, and meaningful financial communication is built.

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Dhiman Chowdhury is a professor of accounting at the University of Dhaka.