The EU's Adoption of IFRS
THE EUROPEAN UNION (EU) ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARD (IFRS)
DIBUA OBIORA VALENTINE Student No. 09175515
INTRODUCTION
The harmonization of accounting standards across countries has been engendered by the globalization of politics and markets. In the past 20-30 years the growth in international trade fostered by increased Foreign Direct Investment flow of capital and development of technology has led to multinational firms establishing presence across the world. This has led to these firms being listed in foreign stock exchanges; this has fuelled the desire to have common international standards that could be understood easily and followed across nations.
The European Union (EU) could be said to be in the forefront in the process of harmonizing accounting practices of its member countries. The enactment of the 4th and 7th Accounting Directives (1978, 1983) by the EU and the obligatory implementation of its provisions into law by member countries demonstrate a clear attempt by the EU to create accounting practices which is transparent and comparable across member countries.
The 4th Directive was aimed at harmonizing the national laws on the accounting regulations of companies. Besides aspects affecting format and valuation, main features of the 4th directive include the requirement to prepare annual accounts which provide a true and fair view (TFV) of the company’s assets, liabilities, financial position and profit or loss as well as substantial requirements on information which has to be provided by means of notes (Art. 43, Fourth Directive).
The Seventh Directive on consolidated accounts determines the identification of groups, scope of groups accounts and obligation to prepare, audit and publish group financial statements as well as consolidation-related methods
Germany and the United Kingdom provide examples of the two primary accounting philosophies worldwide-the Anglo-Saxon and Continental models
DIBUA OBIORA VALENTINE Student No. 09175515
INTRODUCTION
The harmonization of accounting standards across countries has been engendered by the globalization of politics and markets. In the past 20-30 years the growth in international trade fostered by increased Foreign Direct Investment flow of capital and development of technology has led to multinational firms establishing presence across the world. This has led to these firms being listed in foreign stock exchanges; this has fuelled the desire to have common international standards that could be understood easily and followed across nations.
The European Union (EU) could be said to be in the forefront in the process of harmonizing accounting practices of its member countries. The enactment of the 4th and 7th Accounting Directives (1978, 1983) by the EU and the obligatory implementation of its provisions into law by member countries demonstrate a clear attempt by the EU to create accounting practices which is transparent and comparable across member countries.
The 4th Directive was aimed at harmonizing the national laws on the accounting regulations of companies. Besides aspects affecting format and valuation, main features of the 4th directive include the requirement to prepare annual accounts which provide a true and fair view (TFV) of the company’s assets, liabilities, financial position and profit or loss as well as substantial requirements on information which has to be provided by means of notes (Art. 43, Fourth Directive).
The Seventh Directive on consolidated accounts determines the identification of groups, scope of groups accounts and obligation to prepare, audit and publish group financial statements as well as consolidation-related methods
Germany and the United Kingdom provide examples of the two primary accounting philosophies worldwide-the Anglo-Saxon and Continental models