The Importance Of Accounting Standards For Business Affairs

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Introduction IFRS is a general global financial language for business affairs that’s understandable globally and comparable across the international boundaries. IFRS initially was formed to harmonize accounting across European Union, but the value of harmonization was so overwhelming and attractive around the world that became a benchmark globally. Importance of Accounting Standards In this assignment I want to explain the importance of the Accounting standards. As the world economy is becoming integrated and globalization is becoming a universal phenomenon, more and more businesses are getting out of the nationalistic perspective. Today one company have subsidiary companies and plants in many other countries. One of the dilemmas that…show more content…
IFRS International Accounting standards board (IASB) with its capable team of professionals issues International Financial Reporting Standards (IFRS) in order to deal with the problem of asymmetric information. The main purpose of standards is to provide information to the users as to the basis on which the accounts have been prepared to bring about uniformity in financial reporting and to ensure consistency in the data published by enterprises. The general idea is to harmonize accounting standards around the world, however there are contrasting views on the subject. With the rapid growth of international trade and internationalization of firms, the technological advancements and the emergence of international competitive forces is perturbing the financial environment largely. The businesses are badly in need of a common accounting language. A global financial reporting system is a prerequisite for attracting foreign investors. People whose investment grow internationally, want to be able to keep track of the financial health of the securities issuers. Convergence of accounting standards can provide the means to do so. The focus is on three factors: • Comparability • Transparency • Relevance Controversies and Justification The World Bank reports that integration with global capital markets can lead to disastrous effects, without sound domestic financial systems and standards in place. However, harmonized accounting standards are not without
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