The Role and Purpose of International Accounting Standards
International Accounting Standards
International Accounting Standards (IAS) refers to a certain level of quality that should be adhered to while drawing financial statements.
The older set of standards, issued by the International Accounting Standards Committee (IASC), was formulated in 1973 through a consensus of the professional accountancy bodies from Australia, Canada, France, Germany, Japan, Mexico, Netherlands, United Kingdom, Ireland and the United States of America.
The IASC passed a substantial number of standards, interpretations and other guidelines which were adopted by many companies in coming up with national accounting standards.
The organisational structure of the IASC was changed in 2001, leading to the formation of the International Accounting Standards Board (IASB). The changes came into play on 1st April in the same year
In a memorandum of understanding between IASB and the International Federation of Accountants, the objectives of the board include coming up with financial reporting standards with an aim to advance financial reporting and monitor the strict implementation of these standards. The setting of these standards will aid in decision-making by investors and other players in the global capital market.
International Accounting Standards (IAS) are usually agreed upon by the IASB and are applied by member countries, while International Financial Reporting Standards (IFRS) are generally designed to be the global standard, and do not specifically differentiate between countries. Some member countries, such as the United Kingdom and Australia, use a combined reporting framework of both IAS and IFRS.
Importance of International Accounting Standards
It also enhances the transparency and integrity of financial reporting. A transparent system that runs with integrity helps to boost the investors’ confidence in the information provided to him
This will, in turn, lead to financial stability and tremendous economic growth. It also improves the accountability of entities to their stakeholders.
As previously mentioned, International Accounting Standards are developed by the International Accounting Standards Board (IASB). International Accounting Standards are generally considered to be more rigorous than International Financial Reporting Standards, as they deal with accounting rules. It is possible to have International Financial Reporting Standards and International Accounting Standards, however, International Financial Reporting Standards are generally designed to make reports more accessible and to allow for easier and cheaper reporting.
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