Need an research paper on international accounting standards board’s importance all across the globe. Needs to be 5 pages. Please no plagiarism. Formation of the European Union was for economical and political integration of the region but it could not be achieved unless the reporting standards are made comparable. Why? Because if an investor is interested in trading and putting his money which cumulatively accumulates as the region’s capital cannot invest in the member state which has different accounting standards as compared to his state, thus forcing him to invest in his state as he is not able to compare the financials of the other state leading to a nonoptimal distribution of capital. So for smooth and optimal distribution of capital across the European Union, it decided to go for an all-out conversion of accounting standards, making the region more investor-friendly and helping its political cause as well (Susanne & Christina, 2003).
Why was IFRS chosen over GAAP?
Even though the standardisation of accounts was a welcome change for investors and industry as a whole, the reason behind the selection of the International Financial Reporting Standard (IFRS) promulgated by IASB was questioned. It could be answered in two steps, one which was politically motivated and other which was more accounting standard oriented. . .
In 1990s there were increased mergers and acquisitions involving European companies within the European Union and out of it, which increased the pressure of having a unified and standardized form of the reporting system. Globalization of the capital market and international fund movement was mounting throughout the 90s. EU securities exchange allowed companies to list themselves if they were reported according to GAAP or IAS, the only possible way to remain in the global securities market which was constantly dominated by the United States. The European Union governments feared that this way US GAAP would become the international standard for financial reporting. Therefore, a need for a competing set of standards for reporting financials was deeply felt to counter the US dominance and their dictatorship over the rules of accounts to be followed worldwide.