Future Directions in Financial Accounting Standards: The Potential Role of International Accounting Standards
The objective of the International Accounting Standards Board (IASB) is a single set of high-quality financial reporting standards used globally. Why is this a desirable objective?
First, there are cost benefits. The international standards dramatically reduce costs to preparers and also to auditors and to some extent to analysts. This applies primarily to multinational companies that in the past have had to deal with many different accounting conventions and disclosure requirements in their foreign operations. They have had to meet local accounting standards in their subsidiaries overseas and then convert those results into U.S. generally accepted accounting principles (GAAP) for Securities and Exchange Commission (SEC) and shareholder reporting.
At least they now deal mainly with only two sets of accounting conventions—U.S. GAAP and international GAAP—but even this involves two sets of books for every affected operating unit, and this remains expensive. IBM is a prime example ...