Free Accounting Dissertations - This Research Would Be Useful For Institutes And Associations Framing
This research would be useful for institutes and associations framing accounting standards for unlisted companies. Mostly accounting standards have been framed with an eye for listed and large companies. But unlisted companies have much lesser resources to spend on large regulatory requirements and hence should have different reporting requirements that match the benefits obtained from such reporting.
The time limitation and resource constraint mean that the primary data via interviews and questionnaire surveys could only be collected through a limited number of respondents. It would be useful to cover a larger data base before implementing the changes. Also more users of data in unlisted companies like banks and creditors should be contacted before policy formulation.
The remaining paper is divided in the following sections. Section II is a literature review on justification and applicability of IFRS, and state of readiness in companies. Section III discusses the methodology used in this research. Section IV covers analysis of data obtained through the primary data collection and its interpretation. The paper concludes with section V.
SECTION II - LITERATURE REVIEW
In June 2000, the European Commission proposed a new directive requiring that all publicly traded companies in the member states to adopt International Accounting Standards Board (IASB) standards by no later than January 2005. On 19 July 2002, the European Parliament and the Council approved the IAS regulation (EC) 1606/2002 which said ‘For each financial year starting on or after 1 January 2005, companies governed by the law of a Member State shall prepare their consolidated accounts in conformity with the international accounting standards adopted if, at their balance sheet date, their securities are admitted to trading on a regulated market of any Member State’ (EU, 2002).
Rationale for EU’s adoption of International Financial Reporting Standards
The main aim of International Financial reporting Standards is to bring convergence among different national financial reporting standards. Over time, the evolution of different national financial reporting standards has been influenced by local social, political and economic environments. Some of the major reasons for differences in accounting standards are:
Political Capitalist or Communist. Capitalist and communist countries have almost contrasting fundamental economic approach and their accounting standards reflect the same.
Stage of economic development. Developed countries generally have better accounting standards in terms of transparency and clarity.
Corporate finance debt or equity. Companies in continental Europe are financed more by debt than the companies in UK. Accounting standards have over time evolved to reflect the importance placed by different sources of financing on different aspects of financial statements.
Legal and taxation systems.
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