This website uses cookies to ensure you have the best experience. Learn more

The World Needs International Accounting Standards

769 words - 3 pages

Financial reporting has a responsibility to communicate the economic condition and functioning of an enterprise. This has to be accurate, reliable and comply by the accounting standards. Effective financial reporting is essential in maintaining confidence in an economy and encouraging investors to invest.

Towards the end of 2008, the financial sector across the world was becoming increasingly unstable. Lehman Brothers had been declared bankrupt, Various allegations towards accounting standards have been made in relation to the financial crisis.

A lot of banks worldwide valued most of their financial assets at historic
cost, the cost at which the assets were initially bought at. These figures
were not adjusted to the current market values, and therefore were over
estimated on the financial accounts.
The ‘incurred loss model,’ was also heavily criticised. This model required only those losses
to be recorded which would have a damaging result on future cash flows. The damaging
result would have to be reliably estimated. This model did not permit the effects of future
losses to be acknowledged, which was one of the reasons why losses were being severely
understated.

Had these banks valued their financial assets at fair-value cost, then the
accounts of the companies would have been giving a more realistic
Picture of profits & losses, and maybe the crisis would have been
Recognised earlier in time.

Off-balance sheet standards have also been blamed for covering company
losses. Off-balance sheet asset/liabilities are those which are exempt
from appearing on the balance sheet. It has been put forward by the
Financial Crisis Advisory Group that the off-balance sheet standards may
have hidden losses, therefore the overall effect was losses were under
estimated.

Another allegation made towards accounting standards was the complexity of the IAS 39.
This is the financial instruments recognition and measurement policy, adopted by the
International Accounting Standards Board.
It has been criticised for being far too complex, as different financial
instruments have to valued using different techniques. This has been
stated in the Report of the Financial Crisis Advisory Group:

“Some financial instruments are measured at fair value with changes reflected in earnings;
other instruments are measured at fair value with changes outside of earnings; and still
others are measured on a historic cost basis (amortized cost). The category to which a
particular instrument is assigned is dependant not only on its intrinsic
characteristics but also on the reporting entity’s business model. There are multiple and
inconsistent impairment approaches, complicated rules...

Find Another Essay On The World Needs International Accounting Standards

The World Needs Wikileaks Essay

1707 words - 7 pages much important knowledge about our allies. For example, we learned that the Saudis are among the leading funders of international terrorism. We need to quit blaming Wikileaks for the information they've given us because they've been able to give us knowledge of the true picture of the world as revealed in diplomatic cables. These cables give us an informed look on the realities of policy making. We need to instead begin addressing the seriousness of

The World Needs Abortion Essay

3028 words - 12 pages of Abortion The world has a problem of overpopulation, not under-population. The environmental problems occur largely because too many people exist and strain the natural resources. Thus, not creating an extra person is on average good for the society. (If creating a person would on average be good, then more people should be created, and the population size is too small, not too large.) In abortion, when a mother chooses not to create a person

The Need For Harmonising Accounting Standards

1804 words - 7 pages instance, Zimbabwe) have adopted all the International Accounting Standards and made them into national standards. The European Union Commission has declared that all the EU listed companies will use IAS for consolidating their accounts from 2005, but it still has a long way to go. In order to ensure the uniform application of accounting standards across cultural and political boundaries, IASB needs to ensure that they are strong audit practices

The Government Accounting Standards Boards 45

1580 words - 6 pages GASB 45 The Government Accounting Standards Board (GASB) issued Statement 45 (GASB 45) in June 2004; this statement establishes accounting and reporting standards for post-employment benefits other than pensions, or “other post-employment benefits (OPEB),” offered by state and local governments. It requires local governments to actuarially determine their annual required contribution (ARC) to fund OPEB and to account for the unfunded amount as

The Need for International Labor Standards

3599 words - 14 pages multilateral trade negotiations. In addition, encouragement and support should be given to international institutions such as the World Trade Organization and the International Labor Organization in their efforts to institutionalize such practices. A Brief History of Labor Standards In order to provide a clearer understanding of the need for labor standards in the international trade regime it is prudent to examine the historical

The World Needs Population Control

1371 words - 5 pages happen all over the world (Cover 444). The world population has almost doubled since 1965 and is currently growing at a rate of more than 80 million people every year (Ehrlich and Ehrlich 557). This is causing the climate to change and unemployment to increase. The world is slowly depleting its resources, and something needs to be done about it (Cover 444; Kuo 24). It is essential that the world implement global population control policies such

The Advantages And Disadvantages Of New Accounting Standards IFRS

968 words - 4 pages IntroductionIn 2002, the Financial Reporting Council (FRC) announced that Australia would adopt the accounting standards issued by the International Accounting Standards Board (IASB) from 2005(Baxter 2005). After the first of July 2005, the new standards (IFRS) start to use across national border. companies would be required to report current results under IFRS and restate recent results. They will also have to report their latest results under

Compliance with Accounting Standards in the Globalized Indian Banking Scenario

4949 words - 20 pages that financial reports from different companies all over the world can have identical accounting practices, which will make it easy to compare them for various economic purposes in the wake of globalization, GATT and WTO. The Bank for International Settlements has been formulating various accounting standards to specially fit the financial sector.Till date, ICAI and ASB have issued 32 accounting standards and various revisions and general

Why the World Needs Super Heroes

707 words - 3 pages Why the World Needs the Power Rangers Quick! You hear something about someone who is being abused by their parents. What do you do? Tell the police! Tell the principal! All of these are good answers, but the real question is something much deeper. Why help? Why care? Well, I believe people want to help and care for others because they still believe in superheroes. I feel that people want to help because of the ideals, morals, and basic ways

The World Needs More Genetically Modified Food

2676 words - 11 pages most of the time they have no way to get food. Genetically modified food could provide a way to feed starving children all around the world. Genes have been found that shorten growing cycles of certain crops. If these genes are able to be spliced into the DNA of corn or wheat, it could have a huge effect on the number of people who go hungry every day. If we have the capability to save lives, we need to put in the work. Aside from the fact

The World Needs a Little Courtesy

1116 words - 4 pages The World Needs a Little Courtesy       Doesn't anyone show common courtesy anymore? When I was younger, I never knew what my parents meant when I heard them ask that question. I thought people were polite. I never had any problems with rude people. Now that I am older, and actually experience people outside of school, I understand what my parents meant.       What happened to people

Similar Essays

Adapting International Accounting Standards Essay

1430 words - 6 pages the “wide range of national circumstances, legal systems, stages of economic development and cultural differences” (Blake and Hossain, 1996) of the accounting world. From the arguments discussed above, it can be concluded that the harmonisation of international accounting standards is desirable but not achievable. It is desirable because it would facilitate and reduce reporting in many countries; companies will no longer be financially lost

A Report On The International Financial Accounting Standards

1112 words - 5 pages . History: Initial Stage: The international convergence of accounting standards has come along way since its development in the late 1950s and early 1960s. Efforts to bring together the U.S. and the international accounting rules transpired emerging from post World War II’s obscurities. These initial efforts were based on harmonisation. Harmonisation focused on reducing differences between accounting standards used in major capital markets around

Discussion Into The Impact Of Adoption Of International Accounting Standards To The Uk

1530 words - 6 pages Accounting with Finance (Hons)Advanced Financial Accounting Coursework'Discuss the impact of the adoption of international accounting standards in the UK'Most companies in today's world have to prepare some form of detailed record of its activities during the year. There are several users who require such detailed information, and therefore companies produce yearly accounts, showing items such as incomes, cash flows, and asset measurement. These

How International Financial Reporting Standards Affect The Quality Of Canadian Accounting Information

1846 words - 7 pages How would International Financial Reporting Standards affect the quality of Canadian accounting information? INTRODUCTION Globalization has a great impact on today’s economy. The differences of accounting regulations and practices in various countries have become a noteworthy obstacle to globalization and economic development. International Financial Reporting Standards (IFRS) mitigates global business barriers. In order to adapt to the