International Accounting Framework

International Accounting Framework

International Accounting Framework

Accounting provides useful information to decision makers, thus as the business environment has changed so have the accounting standards that govern the presentation and disclosure of information. International Accounting Standards are central to this concept. International standards were first developed in the late 1960's but they have reached their zenith of importance in today's economic and business environment. It is also evident that governments and policymakers recognize this change. This point was made publicly when the European Council of Ministers passed a resolution requiring all EU companies listed on a regulated market to prepare accounts in accordance with International Accounting Standards for accounting periods beginning on or after 1 January 2005. This decisive change was met with great furor in the accounting profession as well as in corporate boardrooms.

The International Accounting Standards Board welcomed the resolution; pleased that the EU was among the first major “nation-states” to take the initiative and embrace international accounting standards. The EU recognized the many benefits of requiring the implementation of international accounting and auditing standards. Moreover, the Securities Exchange Commission (SEC) recently voted on a roadmap that requires U.S. public companies to use International Financial Reporting Standards by 2014. In light of the interests and activities of companies and users of financial information becoming global, the SEC released a statement declaring its involvement and support to develop a globally accepted, high quality financial reporting framework. The benefits of international accounting standards can be financial, economic and political. Preliminary evidence suggests that companies, lenders, and investors would prefer a convergence of domestic accounting standards with international accounting standards to create a quality financial reporting framework.

Although there are significant benefits to implementing international accounting standards and it is increasing in importance there are still many challenges to further development and authoritative implementation. To best understand these challenges one must look at the factors that influence the development of accounting regulations. Such factors can include, social and cultural values; political and legal systems; business activities and economic conditions; standard setting processes; capital markets and forms of ownership; and finally cooperative efforts by nations. These factors if properly understood can mitigate or even eliminate the challenges to international accounting standards. International accounting standards are important today and will most certainly become more important for the future as they are further developed. (International Accounting Standards Board, 2007, 78-114)

Currently, issuers wishing to access capital markets in different jurisdictions must comply with the requirements of each jurisdiction, which differ in many respects. We recognize that different listing and reporting requirements may increase the costs of accessing multiple capital markets and create inefficiencies in cross-border capital flows. Therefore, we are working with other securities regulators around the world to reduce these differences. To encourage the development of accounting standards to be considered for use in cross-border filings, we have been working primarily through IOSCO, and focusing on the work of the International Accounting Standards Committee (IASC). Throughout this effort, we have been steadfast in ...