Wiley International Trends in Financial Reporting under IFRS: Including Comparisons with US GAAP, Chinese GAAP, and Indian GAAP

CHAPTER 1

INTRODUCTION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

1. ONE GLOBALIZED WORLD, ONE SET OF ACCOUNTING STANDARDS: READY OR NOT

A compelling need for a common set of accounting and financial reporting standards

1.1 There is now a real need for a common set of high-quality global accounting and financial reporting standards that are understood, used, and interpreted by different people around the world in the same manner. Historically, countries worldwide have had their own national accounting standards, which some countries may have treasured due to the pride of national sovereignty. However, the desire to become global players and be part of the globalization movement has led businesses across national boundaries to realize that it is an astute business strategy to embrace the world as their workplace and marketplace. In this global market, using different rules (standards) of accounting for the purposes of recognition, measurement, and reporting of financial results would not help countries to achieve their goal of internationalization; rather, it would serve as a severe impediment to smooth flows of information across borders. Therefore, some believe and swear by the concept of “one globalized world, one set of accounting and financial reporting standards.”

1.2 Today that slogan is not just wishful thinking but a necessity. This is evidenced by calls made by important political and economic groups, such as the G20 (the group of 20 major economies of the world’s ...