Discussions on the relationship between the financial statement users, the decisions they make and the process of standard setting has in the recent past raised controversies among the players within the financial reporting field (Beaver, 1981). According to Moonitz (1961) the setting of accounting standards and procedures should not be left under the control of any one group be it the users of the final financial statements, the preparers or group that is charged with the duty standardizing the financial reporting process.
Proper accounting standards and practices are those that are able to give the same results if applied by different preparers in making of financial statements. There is a need to apply consistent rules and procedures in the recording and reporting of financial statements coupled with the growing urge of harmonizing accounting standards around the globe have led to the need of frequently reviewing the applicable accounting standards around the world. The main reason for the frequent reviews of the set standards has been the need to include detailed and relevant information in the accounting standards.
The adoption of the IFRS by the European Union led to the change in use of accounting standards from country specific GAAP to the IFRS. The result has been a slow but continuous change of the financial reporting standard setting body from the UK ASB to the IASB. The country specific accounting standards, GAAPs, were not able to ensure consistency in the financial statement reports. The standard setting process has experienced the following challenges;
The implementation of new sets of rules and regulations within the financial systems require the backing up of resources. Human as well as financial resources play an important role in the implementation process of the international accounting standards. The International Accounting Standards Board lacks these important resources to help implement the standard harmonization process. The differences between national and international standards have made it impossible for countries to offer both human as well as financial support in the IFRS implementation process (Kirk, 2005).
Lack of recognition of the IFRS standards among nations Governments and national regulatory authorities give priorities to national rules and standards more than they do to the international regulations. The IFRS set of standards have not been easily accepted by the national regulatory authorities. The use of national accounting standards at the expense of the international financial reporting standards has made the realization of the aims and goals of the IASB unattainable. The use of national standards still makes comparisons of firms as well as industries difficult. The international accounting standards cannot work in a country if they are not supported by the national accounting regulatory framework. Most nations lack support systems for the IFRS. The reliance on laws by nations as opposed to standards has made the process of standard formation not only expensive but also tedious in the long run within the country (Kirk, 2005).
The success of the implementation process of any set of standards requires that a country's regulatory authority be equipped with a clear understanding of the international standards that should be implemented. The understanding further helps national regulatory authorities to find out the most appropriate ways of adopting the new sets of standards. Countries, UK included, have not been able to set implementation targets. Closer monitoring of progress is important. The UK has not been able to measure the progress of implementation of the IFRS (Kirk, 2005)
The international accounting standards issued by the IASB are concerned with the users of financial statements. The IASB had in mind the users of the financial statements in setting the IFRS. The standards take into considerations the needs, wants and the interests of the users. The standards have helped to improve the information quality of the financial statements that users are presented with. The standards have been able to address most of the users concerns in the UK. The benefits that users have been able to derive from the introduction of the IFRS set of rules such as the ease in making financial decisions are a clear proof (Saudagaran, 2010).
Copyright (c) 2012 Morgan D
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