Accounting standards around the world were immensely diverse. Each country had different accounting standards and methods of calculation within their country. Over time many listed companies and corporations have become international and have spread globally. Individual standards caused a large number of rework and comparison issues in order to prepare financial reports to be in accordance with that of their own country. Many countries have adopted and converged their own standards to the international Financial Reporting Standards. The United Kingdom, members of the European Union and …show more content…
The IAS enhances the comparability of financial statements in Europe and Australia on some fronts. It reduces the risk of foreign activities being incorrectly accounted for as well as the functional currency (currency of the primary economic environment in which the entity operates) being determined inadequately, which could have a major impact on the financial statements. It improves efficiency when dealing with foreign activities and makes it easier for auditors to understand and spend less time on looking at a country’s specific standards.
According to Nobes, the EU and Australia has major implications for accounting research. In the EU, countries such as the UK and Germany still have their differences and Nobes suggested that, “unless a country is culturally dominated by another, its financial system is the main driver of its financial reporting system.”
In Australia, IAS 21 is not required, however the IFRS has been formed closely to that of Australian standards and therefore may be compared more easily. If an Australian company is to compare its financial transactions with that of European countries, the easiness is dependant on whether the current or the temporal method is used. If different