The Fourth and Seventh Law Directives provide a basis for the preparation of the accounts of companies in the EU. The Directives however do not provide a universal standard which was required for the users in the 1990s mainly in the US, when major European companies were seeking globalization efforts in listing their companies across regions onto their various capital markets. In 2002, a decision by the European Union (EU) led to the passing of a International Accounting Standard (IAS) regulation. Requiring all listed companies in the EU to prepare their accounts in accordance with the International Accounting Standards (IAS). International Accounting Standards Board (IASB) was established in 2001 to 2. Motives of harmonizing accounting practices
The initial standards set by EU and any other nations in early centuries were more to accommodate to individual business structure and analyzing needs, rather than for external reporting purposes. The needs were more focus on individual rather than for mass review or scrutiny. At that point of time standards and harmonization of reporting were not highly regarded for as businesses, investor and financial trades were very much simplified and manageable. This is no longer feasible when globalization and financial structures and dealings goes across borders. Complications arise when individual national financial standards are compared with each other.
Initial standards where more focus on national and regional needs, even though efforts had been made to narrow the gaps in reporting, it was seen as more on standardizing rather than harmonizing.
It was only during the...