It is necessary for large listed companies in different countries to Assignment

It is necessary for large listed companies in different countries to prepare financial statements using uniform accounting stand - Assignment Example Financial accounting and managerial accounting deal with the preparation of accounting reports that provide information for decision making. Financial accounting deals with the preparation of financial statements such as the balance sheets and the profit and loss accounts. These are disclosed to both internal and external users. The internal users include the management and employees. Management accounting deals with the preparation of accounts that are used internally by management for decision making. Financial accounting statements are subject to the scrutiny of outsiders; potential investors, financial institutions and economic analysts compared to managerial accounts that are used internally by management (Ramanna & Sletten, 2009). Financial accounts provide information on the financial position and position of the business whereas management accounts provide information for planning, budgets and controls for management decision making. This explains why financial accounts need to follow certain standards compared to managerial accounts. Due to globalization, countries need to speak the same language internationally so that the accounts produced can be understood and improve investor confidence regardless of the country concerned. This paper sets out to explain what IFRS is, the arguments for and against using uniform accounting standards in the preparation of financial statements and the flexibility of the preparation of management accounting reports (Caroline, 2010). History of International Financial Reporting Standards The International Accounting Standards Board (IASB) was formed to promote the adoption of the IFRS so that there is worldwide consistency in financial reporting regardless of where the organization was located. The International Accounting Standards Committee (IASC) was formed in 1973 to prepare standards that would be used by smaller nations in creating their own internal accounting standards. This was succeeded by the IASB in 2001. GAA P is an appropriate tool for financial reporting where organizations operate within a country’s borders with reason. With globalization a company may find it difficult to compare its financial statements using its GAAP without violating the GAAP of another. IFRS were developed due to the growth of global markets and the desire by multinationals and organizations to have one common set of financial statements that can be understood internationally. The IASB was mandated to develop high quality accounting standards that would reduce the cost of doing business, increase efficiency and provide information for potential investors. Currently, there are over 100 countries that have adopted the IFRS. There are many countries that are in the process of replacing the local standards with IFRS such as the US (Armstrong, Barth, Jagolinzer, & Riedl, 2010). Benefits of International Financial Reporting Standards There is greater comparability of financial statements. Companies from differe nt countries can easily compare their accounts. Using different rules in the preparation would not be possible and good for investment. The statements can be compared in all the financial markets irrelevant of where they were prepared. Financial statements prepared using IFRS are more flexible as they are principle based compared to local accounting stan