A sound financial reporting system, supported by high quality accounting standards and backed by a solid regulatory, governance and ethical framework, is a pre-requisite for economic development”. Economic development is affected by many factors; some believe that a strong financial reporting system is one of them. Throughout the report this will analysed and discussed to come to a sound understanding whether it does and if so, how effective it really is. High quality accounting standards can be seen as a fundamental sector for the success of a financial reporting system. The general understanding of it is that it consists of a complete set of principles that require consistent, comparable, relevant and reliable information. This information has to be directed to those stakeholders who make capital based verdicts; these could include: investors, lenders, creditors and many others.
The International Financial Reporting Standards (IFRS) is a body which aims to, “To develop a single set of high quality, understandable, enforceable and globally accepted financial reporting standards based upon clearly articulated principles.” The development of financial report with these standards is part of a very long process which requires much commitment. However the time invested in implementing this system could surely be worth it, the following quotation supports this, “High quality accounting standards are essential to the efficient functioning of a market economy because decisions about the allocation of capital rely heavily on credible and understandable financial information.” For me this opens up why accounting standards are needed; if there is one set standard implemented throughout then it removes all types of complications for the investors making them more confident in their investments; which could then improve the liquidity for the organisation and reduce capital cost. Studies from the ACCA board also support my view on global standards; they have...
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