The Importance of the International Accounting Differences and Standards in the Theory and Practice

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The Importance of the International Accounting Differences and Standards in the Theory and Practice

July 30, 2022 BUSINESS & ECONOMICS 0

In this study, we examine why accounting and financial reporting systems evolved differently in various nations. Finally, we’ll look at research approaches that make an effort to use national characteristics to explain differences in accounting quality that have been identified between countries, even after these nations have adopted IFRS as a requirement for public businesses. The mentioned boundaries are established by national or international standard-setters, like the IASB, who also define the procedures that the corporation must follow for recognition and measurement, consolidation presentation, and disclosure. You have a lot of options when it comes to those worries thanks to some standard-setters. Companies with headquarters in nations whose standard-setters have a wide range of options with regard to issues of measurement and recognition have significantly more accounting latitude in how they present and value their assets, liabilities, earnings, and financial condition. Users of yearly accounts from companies in countries with less accounting flexibility will find it easier to compare the performance of various companies than users of financial statements from companies in countries with greater accounting freedom. Harmonization makes financial data more comparable and gives users of financial data more access. Less information asymmetry exists between stakeholders and corporations as a result. Accounting gives an account of the transactions of an organization—a financial explanation or report. Accounting enables managers to prove to the organization’s stakeholders—owners, the government, financiers, suppliers, consumers, and other parties—that they behaved in their best interests rather than their own. Stakeholders are given these explanations through financial statements or reports, sometimes known as the company’s accounts. The Profit and Loss account, Balance Sheet, and Cash Flow Statement are the three primary financial reports. The format and substance of accounts are prescribed in Schedule 4 to the Companies Act of 1985, which must be followed when presenting financial reports. According to Section 226 of the Act, the financial reports must give readers a “true and fair perspective” of the company’s financial situation. Directors must disclose whether the accounts have been produced in line with accounting standards and provide an explanation for any material departures from those standards, according to the Companies Act. The Listing Requirements, also known as the Yellow Book, contains extra regulations for businesses with stock exchange listings that call for the disclosure of additional information.

Author(s) Details:

Lidija Romić,
Department of Finance and Accounting, Faculty of Economic Sciences Subotica, University of Novi Sad, Novi Sad, Serbia.

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Keywords: Financial statements, accounting standards, capital market, culture, financial informations, organization


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