Accounting Theories

Accounting Theories

Answer 1

The International Financial Reporting Standards (IFRS) are a complete set of accounting standards and set principles for accounting to be done by a company. These are the principles adopted by most of the companies in numerous countries around the world. The globalization of business and finance has led the need for a common set of accounting standards to be used by all countries so as to increase the efficiency of cross-border transactions, their handling and accountability. It has become a need to every organization to use a particular set of standards for its accounting and reporting. This is because the accounts of such company shall become readable and understandable by any accountant or investor all over the globe. International Accounting Standards Board (IASB) has issued IFRS so as to be used by every entity for proper and effective reporting of its accounting all over the world.

Every company or organization is backed by the Securities and Exchange Commission (SEC). With backing from the SEC, International Organization of Securities Commission (IOSC) and IASB, IFRS will soon become mandatory for reporting by businesses in every country (SEC Release). Today, more than 12000 companies from more than 100 countries have adopted IFRS. European Union had begun adopting IFRS since 2005, Canada will come in the list within a year or two and United States will be applying IFRS by 2015. The need for the implementation of IFRS has brought the utility of Business Process Management (BPM) technology come forward. The increasing number of compliance issues raises various challenges for compliance to entities of all sizes. A greater cost of non compliance is not affordable by any company as it is a high risk. With the use of BPM technology, compliance is no more an issue and gives every company an advantage for not leaving any room for error.

In USA, financial reporting is done through their own set local accounting standards, US GAAP (Generally Accepted Accounting Principles). Unlike other things, there are numerous political and cultural impacts on financial reporting of a company as well. Financial lobbying is highly seen amongst the finance personnel while reporting. It is an unethical practice followed by accountants inorder to give unequal treatment to heavy stake holders as compared to the ones who have lower stakes in the company. Whenever it is thought that any particular standard will bring any negative growth, lobbying starts against that standard. This way politics enters in the implementation of accounting standards (Advanced Corporate Accounting).

It is mandatory to disclose material information as required by the set standard in IFRS. Information is said to be material if it has the capacity to influence its user's decision. Every organization has to disclose material information with appropriate details but it has some limitations, due to various factors which include political, cultural and economical influences. Every country discloses information keeping in view its political situation and cultural differences (Securities and Exchange Commission). Not all the information is available in the financial ...