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Introduction

Countries have different histories, values, cultures, and political and economic systems.   They are also in various stages of economic development.   These various environments in which companies operate influences financial accounting.   Some companies operate in many countries.   These companies are referred to as multinational companies.   Multinational companies may earn more than half of their income from countries outside of the United Kingdom. Due to different accounting practices in the various countries, the accounting data reported by the multinational companies will vary significantly from one country to another country.   These accounting differences make it difficult for reported data to be combined by the parent company.   In addition, if investors, creditors, and other third party users cannot understand the financial statements, they will not invest in or lend money to the company.   The need for comparative financial statement reporting across countries resulted in a move towards harmonization of accounting.

Harmonization involves multiple standard-setting bodies working together to create accounting standards that can be applied globally.   The FASB and IASB are jointly working towards the common goal to provide accounting standards that generate “high-quality, transparent, and comparable information that will help participants in capital markets and others make economic decisions”. International Financial Reporting Standards (IFRSs) are the accounting and disclosure rules for corporate financial reporting, as established by the International Accounting Standards Board (IASB). The IASB is a privately funded organization based in London, whose purpose is to develop clear, globally applicable rules for how companies report on their financial status to their investors and other stakeholders.

The IASB is an independent body of the IFRS Foundation, which itself is an independent, not-for-profit private sector organization. It...