Essay Sample on International Financial Reporting Standards – A Global Move
Accounting was developed to help identify, quantify, and organize financial information so others could make educated decisions. The progression of how to approach this has evolved over the years, and several initiatives have been adapted to accommodate different economies. One program that currently applies to 166 jurisdictions (International Financial Reporting Standards, n.d.) across the world is referred to as International Financial Reporting Standards, or IFRS. The overall goal of the IFRS is to establish shared guidelines so that financial information is transparent and comparable worldwide. It has been adapted as countries evaluate financial information and revise to grow with global economics. Since its inception, the IFRS has had a sizable influence over international financial programs, and continues to impact government entities, business relations, and industry decisions.
The history of the IFRS is based in several other organizations and collaborative attempts. International accounting became more widespread after World War II when wealth began to cross country borders. The 8th International Congress of Accountants was held by the American Institute of Certified Public Accounts (AICPA) in 1962, where the members explored theories they hoped would eventually lead to common standards. The AICPA later published Professional Accounting in 25 Countries as a review of accounting standards discussed at the meeting (Financial Accounting Standards Board, “Comparability,” n.d.). In 1973, the AICPA established the International Accounting Standards Committee (IASC) by joining Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom, and Ireland with the United States (International Accounting Standards Committee, n.d.). The IASC promoted basic standards that could be recognized in financial statements worldwide. However, only a few countries decided to utilize these IASC standards; many countries had their own financial infrastructure firmly established and did not want to adapt new policies (FASB, “Comparability,” n.d.).
While the IASC was focusing on international accounting standards, the United States had its own agency directing standard accounting principles within the country. In 1973, the independent, not-for-profit organization known as the Financial Accounting Standards Board (FASB) was created to establish financial accounting and reporting standards for businesses that follow Generally Accepted Accounting Principles (GAAP). The U.S. Securities and Exchange Commission (SEC), which monitors economic markets and vows to protects shareholders, selected the FASB as the guideline creator for public companies (Securities and Exchange Commission, 2017). The goal of establishing and improving monetary accounting and reporting standards to provide useful information to investors overlapped with the beliefs of some of the international community, which led to FASB’s agreement to join the IASC (FASB, “About the FASB,” n.d.).