International Accounting Standards (IAS) is a set of rules on how business transactions should be presented in financial statements. These rules are developed by the Board of the International Accounting Standards Committee. However, it was replaced by the International Financial Reporting Standards (IFRS) by the International Accounting Standards Board in 2001. Take note that by “international”, it means that the standards are being employed worldwide.
Why is Financial Statements important?
Financial statements are important because it serves as a proof of how a company or an institution is doing. It also tells how the management is handling their finances. Basically, it is where the investors base their decisions on whether or not they will invest in your company. In other words, it is a medium of communication between the company and the public.
How importance is International Financial Reporting Standards?
Having standards when it comes to financial reporting is very important to ensure that the information being presented are consistent, reliable, and relevant. In order for this to be followed by various institutions, it must be governed by an infrastructure or organization that oversees and ensures that financial statements are in accordance with the standards.
What are the International Standards on Auditing?
Generally, the international standards on auditing concentrate more on the consistency, transparency, and comparability of the documents to help in the evaluation of the movement of capital within the company. It is important to note that auditing relies on the availability of audit evidence, internal and external controls, and international auditing practice statements. In addition, effective planning and a sense of responsibility is expected of the person who is assigned to audit a project or a company.
What are the Different Benefits of Having Accounting Standards?
- Because it is a medium of communication between the public and the company, financial statements are readily available to anyone (a foreigner or a local). As mentioned above, the standards are actually followed internationally. Thus, it is made not to favor one country over the other.
- Investors use financial statements as a way to compare two or more companies. Thus, having such standards is helpful for them since it makes it easier for them to compare data.
- Having accounting standards that are being employed worldwide makes it easier for multinational companies to make financial statements. They do not have to learn standards that are different from their base country.
- International accounting standards serve as a medium of communication among different companies.