For many years the different histories, economies, political systems, and cultures of countries throughout the world gave rise to vastly different financial reporting systems. In North America, the United Kingdom, and Australia, for example, the financial reporting systems were oriented toward the decision needs of equity investors and designed to measure management performance in a true and fair manner. In European countries and Japan, the financial reports were heavily influenced by government requirements (e.g., tax law), and the statements were targeted more toward the needs of creditors, giving management much more discretion in the preparation of the reports. In these settings financial reporting also tended to be intentionally conservative instead of designed to report management's true performance. In today's fast-moving, global marketplace this situation is quickly changing.

As described earlier, two sets of financial reporting standards are currently accepted by the SEC: U.S. GAAP and IFRS. Non-U.S. companies that follow IFRS are accepted by the SEC, and while U.S. companies still must follow U.S. GAAP, it is likely that soon they will be allowed (perhaps required) to report under IFRS. The advent of international accounting standards dates back to 1973, but recently their acceptance has grown remarkably fast. Since 2005, for example, all public companies in the European Union have been ...

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