What are the main goals of international accounting standards ?

In order to have more control over the financial markets, a global financial reporting framework is employed by global financial hubs. The increase of capital flows leads to the necessity of international standards that make it possible for the organizations and controllers to benefit from it. The financial situation of any company can be communicated through accounting that illustrates the necessary information to the government, banks, and investors. The policies and rules that are available in financial statements will be determined by accounting standards which indicate their content and formats. The regular reporting allows the investors and managers of a given company to have a clear idea about the firm’s status. The governments and the banks will benefit from the financial statements in different ways. On one hand, they are a tool to verify that the company pays its taxes. On the other hand, the investment in a certain firm will be based on the financial statements. The smooth functioning of international business cannot be achieved as various countries possess several accounting practices.
IFRS International Accounting Standards

What are the basic principles of IAS/IFRS standards ?

International accounting standards IAS rely on several principles:

  • The importance of substance compared to the form.
  • The balance sheet approach (priority of the balance sheet on the income statement).
  • The principle of neutrality.
  • The precautionary principle.
  • The valuation at fair value of assets and liabilities.
  • The priority given to the investor’s vision.
  • The importance of interpretation.
  • The absence of specific texts for a sector of activity.

IFRS standards are more based on principles than rules, which leaves companies relatively leeway.

What is GAAP ?

The Generally Applied Accounting Principles are an assortment of ten standards that intends to conserve certain coherence across companies’ financial statements.

When accounting techniques are the same across industries, analyzing or comparing businesses will be a simple task. Therefore, banks and investors can depend on the GAAP to have the adequate data and derive the data that they are searching for.

What are the international accounting standards used for ?

An obligation for the stakeholders of companies that work in international trade dictates to align in order to have an immediate response when it comes to acquiring information of maximum interest regarding the financial and economic solidity of the company, or in any case for those who want relationships with those who work in another country.

International accounting standards are nothing short of fundamental to facilitate the exchange and efficiency of European financial markets and to conform the conduct of businesses and the macro context of legal entities to EU regulations, in order to introduce common regulations.

Their real purpose is to provide immediate feedback on accounting, precisely because the system of rules ensures that companies from the member countries of the European Community adhere to it. Harmonization of rules simplifies and makes the dialogue between companies on financial matters more transparent.

Other advantages, not insignificant, lie in the fact that the image of the company that complies with international accounting standards is subject to a certain improvement, especially in cases where it intends to be listed in the future.

The international character of these accounting principles is particularly useful to companies involved in mechanisms for the export of goods or services. Our duty is to offer our clients the solution to their business issues with the highest degree of sincerity and trustworthiness.