• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

International reporting Standards.

Extracts from this document...


International reporting Standards Over the last 15-20 years, the financial world has undergone a major transformation. These developments have been mainly attributable to dramatic changes in the business and political climates, increasing global competition and rapid technological improvements whilst at the same time, the world's financial centres have grown increasingly interconnected (Reinstein, Weirich,, 2002). These developments have left financial managers facing several major issues. One major issue that continues to re-emerge time and time again is the diversity of financial reporting standards, between trading nations. As the principle objective of financial accounting being to provide all the information required in making sound economic decisions, companies are required to produce the following financial statements: 1. Trading profit and Loss Accounts 2. Balance sheets 3. Cash flow statements However, even with these financial statements, it is not always possible for financial managers to make sound economic decisions due to the differences that exist in accounting standards (Blake, 1997). Accounting Systems The modern day global market place has many different accounting systems that operate under their respective professional accounting bodies. The major accounting practices are found in the U.S. the U.K. and also Europe that operates under the control of several different accounting standards. U.S. The U.S Generally Accepted Accounting Principles (GAAP) is a largely rule based approach to financial reporting. ...read more.


there would be less interpretive and implementation guidance...for applying the standards. Under IAS the rules which follow logically from the principles have much less complex exceptions than U.S GAAP IAS in Europe In an attempt to remove the barriers to cross border trading in securities by ensuring that company financial statements are transparent and comparable, in March 2002, the E.U. ruled that all companies with public shares listed in the European market must bring their financial statements into line with IAS standards by 1st January 2005. This will mean some 7,000 companies who currently use their national GAAP taking on IAS. Senior management have began to recognise the far reaching impact that IAS will have on their businesses, with failure to implement these standards putting their company at a competitive disadvantage. Global Harmonisation Harmonization of worldwide standards has emerged, primarily due to: * increased pressure from competitive global markets * the recently reorganized ISAC, which has long sought to harmonize such standards * Increased requirements for additional information regarding company financial performance * Standardisation of o Presentation formats o Comparable valuation principles o The presentation of standard minimum information, that must be a fair and accurate view of the company performance. (McElree, 2003) In recent years many multinational businesses have entered into international accounting harmonisation to reduce both the cost of analysing accounts from different countries and from running different accounting systems in different countries. ...read more.


The French and Spanish have their accounting practices closely linked to their tax systems which will need to be separated to allow for international standards to be introduced. The proposed international accounting standards will also diminish the amount of options available under the accounting rules. Such things as the calculation of depreciation and the valuation of assets will be given a set rule with no other options in the way its value will be calculated. This will ensure that all values are calculated in the same way allowing for comparisons to be conducted more effectively and accurately. The Future The Financial Accounting Standards Board (FASB) who represent America and the International Accounting Standards Board (IASB) who are the European representatives are working closely to bring their standards nearer to international norms. These new rules that the IAS has outlined must be abided by January 2005. The same goes for the US companies under the (FAS) bringing all standards in line with each other. The ultimate goal is to create one set of global accounting standards. In doing so will boost cross-border investment, deepen international capital markets and save multinational companies, who must currently report under multiple systems, a lot of time and money (Vesey, 2003). They aim to achieve this by reducing options open to accountants regarding valuation of assets, calculation of profits, valuation of stocks and use of discretion in preparing accounts. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Accounting & Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Accounting & Finance essays

  1. Discuss the Need for Regulation in Financial Reporting

    There are number of ways in which this conceptual framework can be used in regulating financial reports. Some of these include:- guide standard setters in establishing accounting standards; providing a frame of reference for resolving accounting problems which are not addressed currently in legislation or accounting standards; increase the level

  2. Discuss the need for regulation in financial reporting.

    The standards covered a whole range of issues including disclosure of earnings per share information and the accounting treatment of stocks and long-term contracts. * The role and usefullness of accounting standards The standards covered a whole range of issues including disclosure of earnings per share information and the accounting treatment of stocks and long-term contracts.

  1. Financial Analysis of Matalan PLC

    Revenue costs relating to opening new stores are expenses incurred. Provision for depreciation is made so as to write off the cost of tangible fixed assets less their residual value on a straight line basis over the expected useful economic life of the assets concerned.

  2. Compare the final accounts of two organisations explaining the similarities and differences.

    So this means to say that revenue is recognised when realised and expenses are recognised when they become due and payable without regard to the time of cash receipt or cash payments. So accrual concepts help to: * In knowing actual expenses and actual income during a particular time period

  1. Unit 5 Introduction to Accounting

    So it is wise to shop around the banks for the best deals to ensure that the expense is kept to the minimum. Overdraft, loan and mortgage interest Any form of bank borrowing will also incur interest charges that must be paid, the best advice is to compare the different

  2. Compare and contrast the approach of the US and UK financial regulatory bodies and ...

    quasi-legislative power (in that it can promulgate rules and regulations and prescribe registration and report forms) and quasi-judicial power (in that it can hold investigations, issue orders, opinions and injunctions against firms' continuing quotations on the stock exchange). (Source: SEC website)

  1. Complete Report on Askari Commercial Bank

    Last few years were very challenging due to historic lows in interest rates, which squeeze margins. The bank undertook a number of debts pricing swap transaction, aimed at reducing the financial burden of its key clients' portfolio, and facilitated value-added transactions like commercial paper participation for helping some customers meet their short term borrowing needs.

  2. Costs, Profits and Break-even Analysis.

    They have to be sure that they can cover both these costs and their indirect (fixed costs) if they are to make a profit. A useful technique for doing this is break-even analysis. To find the break-even point the firm needs to know the contribution that each product makes to their fixed costs.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work