Internationalization of economic trade and globalization of businesses is on the ascendency. Consequently, financial statements prepared according to a nation’s local accounting system may hardly meet the needs of investors, business partners, financiers and decision-makers who are conversant with international standards. Meanwhile, developing and emerging markets are the target of the world’s leading industries that are operating in the saturated western countries. To better undertake their activities in developing countries; they must adopt international accounting standards that suit needs. Additionally, hence foreign investment is major boost to the economies of countries; an investor may demand vivid and comprehensible financial information which underscore the reason why countries must adopt International Accounting Standards.
International accounting standards are accounting standards issued by the International Accounting Standards Board (IASB) and its predecessor, the International Accounting Standards Committee (IASC). Listed companies, and sometimes unlisted companies, are required to use the standards in their financial statements in those countries which have adopted them.
BACKGROUND HISTORY OF IAS
To bridge the gap between accounting standards among countries, the International Accounting Standards Committee (IASC) was founded in 1973 by a group of professional accounting practitioners with an attempt to formulate a uniform and global accounting standards that would aim at reducing the discrepancies in international accounting principles and reporting practices. In this light, the International Accounting Standard (IAS) was proposed which has actively been championing the uniformity and standardization of accounting principles over two decades now. Meanwhile, in April 2001, the International Accounting Standards Board (IASB) took over the setting of International Accounting Standards from the International Accounting Standard (IASC). Henceforth, the IASB updated the already existing International Accounting Standard (IAS) and referred to them as the International Financial Reporting Standards (IFRS). Therefore, from 1973 until 2000 the International Accounting Standards Committee (IASC) released a series of International Accounting Standards (IAS). In 2001 the International Accounting Standards Committee (IASC) was replaced by the International Accounting Standards Board (IASB) and all new standards published since then have been issued as International Financial Reporting Standards (IFRS). In little more than seven years, more than 100 countries throughout the world, including the 27 European Union member states, now require or permit the use of International Financial Reporting Standards (IFRSs). In 2007, Canada, Israel, Korea and Japan all announced their planned move towards IFRSs. The major emerging and transition economies of the world—Brazil, China, India, and Russia—are signing up to IFRSs in an effort to attract the investment necessary to finance their development. The goal of the IASB is to develop, in the public interest, a single set of high-quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles.
SPECIFIC EVALUATION CRITERIA
While IASC and IASB were compiling and adopting the recommended standards some criteria are used in arriving at their conclusions. Parts of these criteria are as follows:
1. Accounting principles should generate relevant and meaningful accounting information 2. Accounting principles should generate prudent and realistic measurements of financial position and performance. 3. Accounting principles should generate reliable measurements of financial position and performance. 4. Accounting standards should not only have a sound theoretical...