Implementing international accounting standards Essay

Implementing international accounting standards - Essay Example "As markets converge and geographical borders no longer present the same trade barriers increasingly there is a need for globally accepted accounting standards. Business needs them, investors are demanding them and accountants are under an obligation to ensure delivery." Here the need for their implementation in the view of the largest professional body of accountants in the UK is expressed as being primarily for the progression of trade, as recent technological advancements in technology has resulted in a break down of previous trade barriers and we are now expected to compete in a world market. Groom (2001), saw the importance of international standards as being a key part of his 5 legged stool of trust, ensuring that investors in capital markets retain confidence and invest. This confidence has become core to the survival of these markets, especially in the light of recent high profile collapses such as Enron in the US and One.Tel in Australia. Since the 2002 decision of the EU the interest in the implications of IAS's and their implementation, along with their costs and benefits, has risen. The core of this debate and the ultimate benefit of International standards to the UK as a whole will be discussed in the remainder of this text with specific focus upon the benefits and costs to both quoted and non-quoted companies. Currently there is significant concern in the UK that there... It is this lack of awareness which is likely to cause considerable increases to costs required to implement the standards when the ASB does converge, as this is no small task and requires a planned strategy.It is hard to actually assess the cost which has already been incurred by listed companies since the 1st of January implementation date, as a full year of trading has not quite been completed and therefore there has been limited analysis as yet, therefore the bulk of this analysis has to be based upon theories and analyses undertaken before implementation in the EU and is therefore, to some extent theoretical. The costs of implementing these standards have been widely discussed and most of these will affect both quoted and non-quoted companies, however they will differ in their extent. The bulk of these costs will be incurred in the education of the users of these financial statements; any stakeholder of the business for which the financial statements are being prepared, will be effected to some extent, and will need to be educated in order for the company to survive the change. Stakeholders are extremely influential and include banks and lenders, auditors and shareholders, a business needs to educate these people on the change and its impact upon their financial statements, and in this education other costs will be incurred. Gerhardy points out that banks and lenders will require reclassification of debt and equity, leading to dividend payout issues, and the reclassification of debts will lead to renegotiation costs with lenders, this will lead to strategy issues and a need for good communication of the effects IFRS will have on business with the shareholders, all of which will result in significant cost to all