Accounting Essay

280 WordsJan 30, 20122 Pages
International reporting Standards Over the last 15-20 years, the financial world has undergone a major transformation. These developments have been mainly attributable to dramatic changes in the business and political climates, increasing global competition and rapid technological improvements whilst at the same time, the world's financial centres have grown increasingly interconnected (Reinstein, Weirich,, 2002). These developments have left financial managers facing several major issues. One major issue that continues to re-emerge time and time again is the diversity of financial reporting standards, between trading nations. As the principle objective of financial accounting being to provide all the information required in making sound economic decisions, companies are required to produce the following financial statements: 1.Trading profit and Loss Accounts 2.Balance sheets 3.Cash flow statements However, even with these financial statements, it is not always possible for financial managers to make sound economic decisions due to the differences that exist in accounting standards (Blake, 1997). Accounting Systems The modern day global market place has many different accounting systems that operate under their respective professional accounting bodies. The major accounting practices are found in the U.S. the U.K. and also Europe that operates under the control of several different accounting standards. U.S. The U.S Generally Accepted Accounting Principles (GAAP) is a largely rule based approach to financial reporting. It is based on tens of thousands of pages of accounting rules that have been accumulated over decades. For example, there are around six hundred pages on derivatives alone. U.S GAAP contains many so-called 'bright lines' (Nobes, 1995). This system extends beyond the U.S. into Canada, Mexico and more recently

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