Financial Accounting Coursework Example | Topics and Well Written Essays - 2250 words

Financial Accounting - Coursework Example It was also decided that the auditors would also have to follow the International Standards of Auditing (ISA), so that it would be easier to analyze the financial statements of the company on a global platform. The objective of this study is to discuss the improvement in the quality of information that users of financial statement get in IAS environment. Developing a strong accounting system is of significant importance because ability of the investors and the banks to calculate and assess the financial strengths and the performances of the companies depends on the transparent corporate accounting system. There should be mandatory consolidation of accounts along with the subsidiary accounts for ascertaining the true profitability. There was lack of segmented reporting of income, other disclosures, extent of deferred tax liabilities, etc. These were few reasons for which a common accounting standard was introduced. The Regulatory Framework for Financial Reporting All the companies in UK have to comply with the company laws regardless of its size. It was also important for companies to develop financial statements for the investors to analyze the financial position of the company. It is also the legal responsibility of the directors to see that the company is working in compliance to the accounting standards. According to the Companies Act of 1985, companies must represent a true and fair view of their accounting statements. In 1990s, the Financial Reporting Council (FRC) was set up for setting the accounting standards in UK. It was a solely independent body set up by the Department of Trade and Industry (DTI) and the City institutions. In the year 2000, the International Organization of Securities Commissions (IOSCO) reviewed the IAS. It was proposed that all the EU companies would have to prepare their accounts or financial statements by following the IAS standards. It was estimated that about 7000 companies in EU were accountable for using IAS, whereas there w ere only 275 companies who were using IAS till then. All the measures required were taken to establish IAS as a law in EU. This regulation was applicable for the detailed accounting provisions. It was on the member states to choose whether they wanted to permit their unlisted companies to follow the IAS standards. However the UK Accounting Standard Board (ASB) did take several initiatives to narrow down the gap between IAS and Generally Accepted Accounting Principles (GAAP). IAS is still being modified and it has become IASB in the process of converging IAS and GAAP. A survey was conducted by Pricewaterhouse Coopers in the year 2002 among 650 Chief Financial Officers (CFOs), all across the European Union to find the response of the companies towards the usage of IAS. It was found that 62 percent of the CFOs agreed to the fact that IAS would help in establishing an effective and transparent accounting system for them. 85 percent of the companies still did not use IAS, 92 percent of t he CFOs were confident of meeting their deadlines of 2005 and about 60 percent did not even begin their planning for transition. International Accounting Standards (IAS) The study aims at discussing the different aspects of IAS, in order to analyze the improved quality of