There are two important trends in the financial reporting the U.S.’s GAAP and UK’s IAS. More and more countries are converting to the International Accounting Standards (IAS). The U.S. should learn the IAS it’s the future of financial reporting.
International Accounting Standards Committee (IASC) was formed in June 1973. Most countries recognize the need for more uniform standards and that’s how IASC was formed. IASC’s standard is to work generally for the improvement and harmonization of regulations, accounting standards and procedures relating to the presentation of financial statements. IASC lasted until 2001 and then came International Accounting Standards Board. In 1974 the first associate members admitted were Belgium, India, Israel, New Zealand, Pakistan and Zimbabwe.
In 1977 International Federation of Accountants (IFAC) was international professional activates. In 1981 IASC got complete control in setting of international accounting standards. Now members of IFAC became members of IASC.
On April 2001 the IASC gave up accounting standards responsibilities to IASB. The IASC Foundation is the body of IASB and independent accounting standard setter based in London, UK. IASB has responsibility for setting accounting standards. The IASC Foundation is a non-profit corporation and is privately funded. It has five bodies the Trustees, the IASB, Standards Advisory Council and International Financial Reporting Interpretations Committee. The Trustees oversee the whole organization and raise funds for the organization. The Trustees also select the IASB members. The IASB’s board members consist of fifteen and come from nine countries. The Board is devoted to developing in the public interest, clear and enforceable global accounting standards that require transparent and comparable information in general purpose financial statements. And the Board helps with national accounting standard setters to achieve meeting in accounting standards around the world.
IAS is gaining widespread use and recognition around the world. Many countries already endorse International Accounting Standards as their own without amendment or with little change. The global business community is responding quickly to the IASB’s efforts to develop uniform global accounting standards. The European Commission recognized that it couldn’t use the U.S. GAAP. It considers that IAS provides a comprehensive set of standards for financial reporting that is albe to serve the needs of the international business. The European Commission thinks that the IAS has the advantage of being developed with an international outlook. The European Commission is progressing proposals that will require all listed companies in the European Union to prepare their consolidated financial statements using IAS. This regulation will require 7000 companies in the Europe Union to unite their financial statements under IAS starting 2005. Many leading companies in the European Union already stated their financial reports in agreement with IAS. It is expected that companies with listed debt in the European Union will be required to report IAS results by 2007. This new rule will change the accounting procedures for European Union companies; it will not be easy (“IASB”).
Many developing and newly industrialized nations like Nigeria and Singapore have adopted IASC standard as their national standards. The most significant international developments are the adoption IAS by at least fifteen new different countries around the world. European Union, Australian, and Russian companies and others will be required to us IAS in the next few years.
The Securities and Exchange Commission (SEC) indicated that it would allow foreign companies to use IASC standards in securities offerings in the United States it the IASC met the three conditions. The IASC is making substantial progress with conditions. It is entirely possible that the SEC will accept IASC standards in the near future. If this happens many U.S. companies will petition to use IASC stands instead of U.S. standards. It is better that all companies follow the same standards. Under the IAS users of financial information will find it easier to make comparisons among companies in different countries.
U.S. standards have been criticized for being overly detailed and complex and containing on/off switch rules that worship the form and not the substance of the transactions (“IASB”).
The IASB is a set of global accounting standards to provide common financial language for the world’s capital markets and make it easier for financial statement users to understand and compare financial information.
Convergence of accounting standards is the centerpiece of the efforts to build a global financial reporting infrastructure. The desire for convergence of accounting standards is greater than ever. Achieving this would greatly aid cross border investing and decision-making.