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SSRN-id901301 - The Impact of International Accounting...

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The Impact of International Accounting Standards on Firms Marjan Petreski Abstract The aim of this paper is to provide some arguments for the effects of the adoption of the International Accounting Standards on firms. Therefore, IAS impact on firms’ management and financial statements are analysed. Provided financial statements intend to support or reject findings in the literature for IAS effects on them.
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1 Table of contents: INTRODUCTION ................................................................................................................................................ 2 IAS ADOPTION EFFECTS ON FIRMS’ MANAGEMENT AND DECISION MAKING PROCESSES...3 IAS ADOPTION EFFECTS ON FINANCIAL STATEMENTS ...................................................................... 4 T HEORETICAL ASPECT ........................................................................................................................................ 4 C ASE STUDY : S AINT -G OBAIN K EY I MPACTS OF THE IAS APPLICATION .............................................................. 5 Impacts on the Balance Sheet ....................................................................................................................... 6 Impacts on the Income Statement .................................................................................................................. 7 CONCLUSION ..................................................................................................................................................... 8 REFERENCES ..................................................................................................................................................... 9 APPENDICES ..................................................................................................................................................... 11
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2 Introduction International Accounting is a field of academic interests which has significantly risen in the last couple of years. As such, it triggered heated debate among economists for putting forward different issues arising from the still vague boundaries of this scientific and practical area. The latter becomes important especially in emphasized conditions of international integration of firms, which in turn, provides them with more opportunities to approach new markets and therefore to increase their sales, and, of course, to obtain financing from the multinational financial markets. The last is accompanied with many obstacles. From the view of the accounting, outrunning those impediments calls for harmonization of international accounting (Combarros, 2000). Rudhede and Wahlberg (2003) accentuate the lack of accounting synchronization and relate this with the investors’ and companies’ difficulties in understanding the variety of accounting principles among countries. Hence, a supranational entity is needed to be titled for preparing, issuing and interpreting internationally accepted rules for the accounting practice. Such body is The International Accounting Standards Board, which is “ committed to developing, in the public interest, a single set of high quality, global accounting standards that require transparent and comparable information in general purpose financial statements. ” (IASB, 2002, p.1). International Accounting Standards, though, create a common language for defining, interpreting and publication of financial statements in the whole world (Blanc, 2003). Furthermore, their aim is “to provide a standardized and coherent sight of the companies to the shareholders and investors” (p.4). Establishing International Accounting Standards should enhance firms’ performance in many ways. Houston and Reinstein (2001) point out that international accounting harmonization will trim down the costs of doing business, especially across national borders, than will contribute towards greater efficiency of the market regulations and will reduce the costs for conducting financial statements analysis and investments in international context.
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