International Financial Reporting Standards (IFRS) Are Dangerous

International Financial Reporting [Standards] (IFR[S]) Are Dangerous

IFR[S] is claimed by its supporters to be in use in 165 worldwide countries, but not the U.S.A. Thus, it has quickly placed most of the western and developing world at the precipice of a major financial implosion.

Background

What do the following eras have in common?:

*???????1634 – 1637???:??????????Holland Tulip Bulb Scandal

*???????1920 – 1929???:??????????U.S. Stock Market Collapse

*???????2005 – today??:??????????Unwarranted Belief that IFRS Should Be Accepted, or

Is Credible, For Public Usage.

Countries that utilize IFRS (not the U.S.A.) are merely ignoring a history of highly promoted financial failures that duped millions of “investors” for several years. Logic did not prevail in these times of “get-rich-quickly” promotions.

IFRS is almost solely based on a switchover from “cost basis and cash-flow evidence” to falsely being based on “current arm’s length fair market values.” The monstrous hole in the IFRS’ “anchor concept” is that across-the-world available credible “fair market values” are just not readily found, or be commonplace. Presto! Such a gift or starting point for financial reporting emerges. It means that, by default, IFRS allows each corporate management to be the ones who prepare the company’s own numbers (and take their, in essence, school report card home.)

Each management can thereby make themselves look good and merit a bonus. But, across-the-world, comparing company results becomes impossible because each individual management choice can vary widely. “Common ground” does not exist, but investors are not cluing in.

In addition to such IFRS “basics,” along comes a history of failed IFRS-user corporations. Among these are entities that quickly went bankrupt (such as marijuana growers and distributors). IFRS strangely permits its “income” figure to be grossly reported as being well in excess of actual cash receipts less cash disbursements (or sales from “basic operations;” net of expenses for providing a product or service). IFRS tries to fog the financial picture by, instead, allowing non-cash “value” increases for certain assets as constituting much of reported “income” for a period, such as a year.

In contrast, old GAAP reporting standards utilized as a crucial cross-check on the validity of reported income figures being its close dollar relationship to cash receipts less disbursements from sales/services (or basic “operations”). The devastating effect is to allow “income per IFRS reporting” to float unchecked on its own, unrelated to actual cash earnings. Such is just one of several examples where IFRS disconnects with the realities that characterize successful companies. (Corporate management is given considerable freedom under IFRS to choose the “value increase” number.)

Hence, a major flaw in IFRS’ “income” figure is that the operating cashflow often becomes a small portion of IFRS’ reported inflated “income” number. IFRS’ “income” number often can bear little relationship to an entity’s liquidity/solvency position. Consequences thus are the growing increases in bankruptcies from excess cash dividends, and similar improper interpretations.

Abandoned cross-checks are commonplace under IFRS’ ill-considered management-created reporting “ideas.” Cash that may not be received for 10 or more years can end up being reported as “income” in one current year. How? Management will say that the “value” increase occurred (in their opinion) this last year. What IFRS allows will then be seized upon by financial tricksters. Who checks or controls management’s fantasies? Certainly not IFRS.

Such examples as the above seem virtually endless when IFRS is viewed closely. Running away from the reality of cash receipts, when cash monitoring is a critical management function, is frightening. Having to borrow to obtain cash adds interest expense, having to pledge assets as collateral, and much more in risks.

Simply-stated, IFRS-based “income” and “value” exaggerations can quickly shorten the life of a company. IFRS can be reporting “fantasies,” which can easily cause financial explosions for investors and others. IFRS can become quickly dangerous.

In summary, like the tulip bulb and 1920s eras, an ugly end to IFRS surely has to arrive. When? Much is dependent upon the gullibility of governments and those who manage pension plan assets. Counting on “fat future pension payments” may vanish quickly if money is currently being utilized to buy shares in IFRS-reporting, bloated asset-value, entities.

Unfortunate Rise of IFRS

Whereas IFRS rose quickly as a result of heavily-promoted material exaggerations from alleged financial tricksters, its death stage will be painful, lengthier and excessively costly to its worshippers. Major courageous decisions are required from governments, and promptly. Otherwise, ongoing misrepresented IFRS-based financial statements will cause more and more nasty, needless losses. Enough. Overwhelming negative evidence is piling up against IFRS, and also self-regulation.

The absence of planning by governments, investors and the average citizen for the inevitable serious collapse of IFRS is beyond baffling, and inexcusable. Deep foundation flaws within IFRS ensure that it cannot be repaired; procrastination will simply make matters worse, and very costly to undo.

In its roots, IFRS is nothing more than a financial hoax. It allows corporate management to freely fantasize and report profits/income and thereby pretend to show a “success.” In time, IFRS will become recognized as being unreliable and doomed, like 1929 reporting.

Accompanied by massive promotion and irresponsible procrastination by governments (in those countries that permitted the usage of IFRS) claims of “value” increases are being accepted despite plentiful evidence of exaggerations to the contrary. The so-called “value” is not cash-based. Hence, the role of external auditors in rubber-stamping “fake values” could easily destroy their previously-held reputation of being independent and credible. Supporting IFRS has major downsides for many people.

Who remains to keep corporate financial con artists from utilizing imaginary financial results in those countries where IFRS is permitted? Self-regulation of external auditors in such countries has long been deficient. Looseness of oversight has cost investors billions of dollars of losses. In some countries IFRS has been introduced and promoted by, believe it or not, the countries’ external auditors. Legislation is thus widely needed to cancel self-regulation for external auditors. Simply, external auditors have remained silent about huge IFRS deficiencies. Or worse, they have openly accepted IFRS, with its fake non-cash numbers. Irresponsible?

At its roots, IFRS destroys needed close financial links between reported income and actual “cash flows from basic operations” (sales and services). Instead, IFRS promotes an “income” figure that is largely non-cash, highly-speculative “value increase” “income.” IFRS in essence disconnects reported “income” and credible cash earned by “basic operations.” Far too much reported IFRS income is represented by non-cash guesses, or enhancements of reported, but is often-faked, “income.” Basics, such as public company day-to-day stock prices, are not reflecting that enough investors are recognizing the degree of “non-cash” invented or fake income. Hence, liquidity and solvency nightmares can easily arise, and become complex to try to cure. Examples of failures will appear quickly when the IFRS “bubble” bursts.

Examples of these successful delusions are plentiful. Marijuana companies, some real estate “empires,” many financial institutions (with their varying “rolling loans,” designed to make uncollectible interest receivable magically become “paid,” simply by issuing the defaulter a “new” larger loan). As well, other industries, are utilizing fake IFRS. IFRS’ financial statements are vastly different from, for example, U.S. GAAP. Calling non-cash based IFRS “income” as being some form of “realism” consequently is often well beyond absurd. Such a viewpoint lies at the heart of a chunk of nasty IFRS’ magic, whereby non-cash values are foolishly being accepted as cash-receipt equivalents. Such is merely 1929 all over again.

IFRS “magic” is too often even labelled as having been “audited.” Pension plans, for instance, are inclined to “value” investment assets, such as offshore infrastructure projects, annually even though similar roads and bridges may actually sell only once in a 10-15 year period. “Market values” can thus be “invented” by managements, many of which receive bonuses linked to annual increases in the pension’s overall net asset “market value.” Ramifications of “guesswork IFRS” creep into many portions of IFRS income statements and balance sheets, such as for mutual funds and real estate and private equity companies.

Reality is that, with pension-asset-based savings, much of a country’s population has become a trapped victim of “hocus-pocus” IFRS lies. The fact is that many countrywide pension plans report using only IFRS. Asset values being displayed can be management “guesses,” for perhaps 60% or more of the pension fund’s reported assets. (In technical terms, such estimates/guesses are called “Level 3” (“no direct evidence”) valuations; but, are often labelled as being “audited”). Thus, as a financial “investor,” it is difficult to not become impacted by management’s non-neutral asset “values.” Why some governments continue to “look the other way” given IFRS’ growing exaggerations, or worse, is well beyond bothersome.

Also of deep concern are various government denials about IFRS’ deficiencies (essentially, based on some of its wording, IFRS would appear to have been written, one way or the other, by financial tricksters). That is, little attention seemingly has been given in governments to outright prohibiting IFRS, and winding it down very soon. Procrastination merely makes matters worse. Why? A new batch of swindlers will arise over time, as a result of their seeing “successes” by the early trickery groups, which adopted IFRS. Some real estate companies have shown newcomers “how to succeed” with trickery, from not recording asset losses.

It is difficult to comprehend for how long governments in some countries can avoid being accused of “being in bed” with the con artists. Silence from governments can be interpreted as strong “evidence.” Pretending that IFRS will “cure itself” defies logic. Over 10 plus years of continued confusion should be weighed as being plenty of evidence that IFRS is not honest, serious financial reporting. Investors are not being protected.

It is obvious that IFRS has major incurable flaws that cannot be repaired. Far too much power has repeatedly been given to corporate management to choose its own dollar amounts, especially when bargained, arm’s length, publicly-concluded, actual fair market values simply do not exist.

IFRS has been promoted as permitting financial comparisons from company to company across the world. Such is impossible when each separate management is given IFRS permission to choose the dollar figures that are alleged to be “close to” fair market values (which are typically not readily available information, and can easily be manipulated). In short, the foundations of IFRS are located on the classic “vanishing quicksand.” Here today; gone tomorrow. Appraisers have been permitted to make extensive assumptions, including nonsense ones, to support their bogus “values”.

The dozens of recently failed marijuana companies are examples of strong evidence of IFRS’ failure. Massive audited gross profits were being published even when no actual cash data was available for proof of sales and costs of sales. All figures were pulled out of the air, even in the period when laws prohibited public sales of non-medical marijuana. Failure of IFRS becomes inevitable; and such was known years ago! Yet, IFRS figures were being (and still are) believed by “investors,” heavily because of lies and buck-passing by governments.

Trust in IFRS seems to have been built-up and then reinforced by “false advertising.” Yet, silence from governments and external auditors, among others, has created a mess that will not cure itself. Governments that accepted IFRS ought to be ashamed of their callous behaviour. Trying to avoid responsibility today merely encourages the financial tricksters to prolong a form of theft.

The Fall of IFRS

Accordingly, next on the agenda, is “how can the growing damage from not having prohibited IFRS years ago now be reduced? Clearly, countries that accepted IFRS based on the advice of external auditors have to somehow apply reprimands, to avoid a repetition. Such auditors have well demonstrated that their self-governing rights have to be cancelled immediately. It is obvious from the many recent examples of financial disasters that little of consequence was carried out by the external auditors to at least prohibit the “worst of the worst,” while an “escape from IFRS” plan was being finalized. How much proof evidence is needed to realize that urgent action is needed?

Nevertheless, for example, in some IFRS countries, university students are still being forced to learn IFRS so that they are then permitted to pass public accounting license examinations. Such a requirement surely is irresponsible, or much worse. When IFRS finally explodes, such an IFRS “education,” surely would constitute more than a nasty brainwashing. Years of one’s life were wasted.

Winding-down IFRS requires especially serious planning. Those who exploited ill-appropriate, easily-manipulated IFRS cannot be rewarded once again, by selling to clients expensive packages of “we will help you convert to, say, U.S. GAAP,” (or something else). “We will show you how to minimize having to record losses” (from previously overvalued IFRS-based assets, and unrecorded losses and liabilities). Preparers and users of revised financial statements will require serious educations.

In essence, new government agencies will have to oversee the “new converter-type” entities that are likely to appear. Special oversight training will be needed to help minimize continued trickery. Many employees of Securities Commissions probably will not be well-versed in the warning signs to watch for. For example, determining the sources of actual operating cash flow needs extra-special attention. (IFRS essentially abandoned being linked to valid “income” and thus such an odd (“ignore cash flows”) treatment increasingly became one of IFRS’ permanent weaknesses.) Value-for-money studies of a proposed new government agency should easily be able to demonstrate their worthiness, and necessity. Public companies that utilized the major holes/deficiencies of IFRS are likely to seek “special permits” to drag their feet, in many ways.

Simply “look around.” Governments have to lead the way. If not, who will?

However, on the positive side, countries that abandon IFRS are likely to attract more investor dollars, so as to create local jobs (instead of being boycotted). Week-by-week, investors are “cluing-in” that IFRS reporting companies have a high probability of issuing bloated financial “income”/profits, by deferring the recording of losses, for example.

Why does planning for the collapse of IFRS have to commence as soon as possible? In many industries (such as pension management, real estate, banking) reality is such that a very high probability exists that IFRS-inflated asset and equity “values” still are being reported to you. Similarly, unrecorded liabilities, not to mention operating cash flow overstatements, are being linked to faked IFRS “income.” Bogus operating cash flows for sales and services can cause many problems. (Misallocated resources can become “losses forever”.)

The worst abusers of IFRS’ “illogic” are simply not likely to be supporters of wanting to abandon their previously bloated asset “values.” (They would also have to record long-undisclosed bad loans.) Typical claims from abusers likely will be along the lines of “our current records do not allow us enough history to abandon what our appraisers, in essence, “overstated.”” Pleas are likely to be along the lines of “let us keep what has already been falsely recorded,” (being fantasy dollars).

Serious planning has to clearly set forth which overstated IFRS asset “values” have to be fully reversed (and which partially), based on valid publicly-available data, (as opposed to being “pie-in-the-sky” carefully-chosen assumptions). Perhaps, some ranges of figures may have to be introduced for those who choose not to return to cost-basis or verified figures. Other alternatives have to exist for “special” situations.

IFRS revenue and loss recognition criteria can be scary, and surely can be abandoned for the future years, and tightened considerably, based on actual, historical data for products, customers and similar data. (Which receivables were never collected in the past in full? From whom? Which had to be reversed; and similar?)

Unless overstated IFRS assets and equity, along with fairly stated liabilities, have to be reversed to currently supportable dollars, exaggerations of the past will cause considerable confusion. Dollar indiscretions of the past cannot linger for the future years. Too many investors still do not seem to comprehend that they have been swindled.

Without doubt, massive lobbying will occur from those IFRS supporters who took material advantage of weak, illogical IFRS. Examples already exist in some companies where corrected “owners’ equity” in IFRS terms can approach zero dollars (from lowered IFRS asset “values,” and losses being recorded, instead of being deferred). Some of the examples arise from companies that have now gone bankrupt. Paying cash dividends based on IFRS’ inflated “income” appears to have been a contributor to their bankruptcy. IFRS makes liquidity tracking much harder; this lesson does not appear to have been adequately learned.

As much as the “cancellation” of IFRS in a country appears to be problematic, the alternative of accepting blatant thievery is still much worse. That is, swindlers would be free to steal from citizens as long as IFRS can be easily inflicted on people. Without cancellation of IFRS more countries will join the list of “unsafe investment sites.”

The media (especially business reporters) has certainly compounded the “thefts” from investors, pension plan supporters and others. Largely, the media has remained silent; they have avoided (along with governments) educating people, by not being willing to explain how easily IFRS can be, and is being, utilized to steal peoples’ savings.

Basics such as bloated “non-cash income” are not that hard to explain to the public. After all, when a country’s income tax department does not tax much of non-cash IFRS “income,” such should be a monstruous red flag. IFRS should never have been approved for usage in several industrial countries. Its built-in thievery opportunities are extensive. Far too many “lies” about IFRS have to be explained as being what they really are, such as being massive income and “success” exaggerations.

As has been explained many times in our writings, the longer IFRS is allowed to exist, the more difficult will be a transition to a safer reporting system. Swindlers can use all the millions of dollars that they have stolen from you, to pay for advertising to continue to tell outrageous lies about IFRS to the public.

IFRS is nothing more than a “flim-flam” or “hoax,” which was designed to con people who fail to do necessary research. Criminal codes exist to handle such situations. But, so far, government silence and inept oversight has failed to contain or restrict the culprits. Promise to try to help yourself. Demand better protection from governments. Inadequate investor laws are not your friend. Collapses such as 1929, and many more over several years, require your close attention.