Global accounting standards Essay Example | Topics and Well Written Essays - 2000 words

Global accounting standards - Essay Example The increasing importance of a single set of global accounting standards in international market has given rise to the debate.The decision on the part of the European Union to require its all the member states to adapt their local GAAPs with respect to the IAS/IFRS, proved to be a milestone in the journey of IASB towards the FASB. However most of the European countries had already embarked on their convergence towards the international standards for financial reporting. The United States' standards setting body, FASB is consistently working towards the convergence of US GAAP to the international accounting standards in response to international pressures.This essay provides an insightful study on the development of IAS in the Europe and the convergence of FASB with the accounting standards. Moreover it discusses the impact and benefits of having a single set of global standards on the users of financial statements.In response to the financial reporting needs of the increasingly globa lised markets, the European Union passed legislation in the year 2002 that required all its member states to adapt their financial statements with respect to the IAS and IFRS. Ruder (2005, p555) says that, "the European Union's 2002 decision to adopt IFRSs for all of its listed companies was a significant stride toward convergence". This stance on the part of the European Union encouraged countries like Germany, Italy and France to accelerate their process of integration with international standards ... However significant changes only became evident after the EU regulation of convergence to IFRS (Delvailleet al., 2005). The Finnish standards started to converge with the IAS in the year 1993. The accounting standards of countries like UK, Netherlands, and Ireland are the most compatible with IAS as compared to other European countries (Haller, 2002). In Germany, on the other hand, the convergence to international accounting standards had taken place well before the EU regulation. Germany took such initiative in response to the international pressures concerning the presentation of company accounts. The German companies were required to present and report their financial accounts in accordance with either the IFRS or the US GAAP, thus the country adopted an accelerated approach towards adoption of international accounting standards. In the year 2004, the government also passed an Act that implemented the EU regulation to use the IFRS for the purpose of financial reporting for the year ended 2005. Hence, in all these European countries, the governments realised the importance of international standards and the irrelevance of their local GAAP with regard to international markets in the year 1998 (Delvailleet al., 2005). Whittington (2005) elaborates that the international accounting standards have developed considerably over the time. The IASB, ever since its creation, has been amending and revising the previous accounting standards so as to re-assure their applicability. The pre-eminent examples of this amendment are the IAS 32 and 39 that had been originally adopted by the IASB from the IASC. There were several difficulties in both the standards that made it