International Accounting Standards (IAS)
International Accounting Standards (IAS) are accounting standards that were issued by the International Accounting Standards Committee (IASC) before April 2001. The IASC’s standard-setting role was passed to the International Accounting Standards Board (IASB) in 2001 and new standards issued by that body are called International Financial Reporting Standards (IFRS). Existing IASs, which were adopted and reissued by the IASB are still known as IASs. In a broader sense, under the Companies Act 2006, "international accounting standards" is used to refer to the international accounting standards within the meaning of the IAS Regulation as adopted from time to time by the European Commission in accordance with the IAS Regulation.
The purpose of these standards is to ensure that the financial centers of the world, which have become more interconnected than ever, can use a global financial reporting framework that ensures effective regulation of financial markets. The growing volume of cross-border capital flows makes having international standards, that are high in quality and testable across the board, a priority. By having these standards in place, capital markets that are located in different jurisdictions can create the most efficient capital flows that are beneficial to regulators, organizations, and the market as a whole.
The concept of converging accounting standards started in the 1950s with post-World War II economic integration and related increases in cross-border capital flows. Initial attempts to converge focused on harmonization, or reducing differences among the accounting principles used in major capital markets throughout the world. By the 1990s, harmonization was replaced with convergence — the development of a unified set of high-quality, international accounting standards used in all major capital markets and elsewhere. The International Accounting Standards Committee, formed in 1973, was the original organization setting international standards. The body was reorganized in 2001 and became an independent international standard setter called the International Accounting Standards Board. As of 2013, the European Union and over 100 other countries require or permit the use of international financial reporting standards (IFRS) that the IASB issues or a local variant of them.
While the IASB has no authority to require countries to comply with its standards, many jurisdictions around the world do so. The most notable exception is the US, which is governed by its own Generally Accepted Accounting Principles (GAAP).
There are three different editions of the standards that are printed today. The first edition was the Red Book, which is the original set of standards that have not been superseded or replaced. While this version is still published, it does not contain some updated information. The Blue Book, printed in 2010, consolidates standards that were put in place before January 1 of that year. The Green Book, which is the latest version to be printed, consolidates all of the current standards. It is important to also have current interpretations of these standards. In a global environment, it is important to have a global set of standards that can be adopted and used by every country. This makes the framework much more reliable and consistent. While the US currently adopts the GAAP standards that were created by the Federal Accounting Standards Board, some companies that operate on a multi-national level have adopted international standards. The worldwide adoption of the IFRS will make the reading and analysis of financial statements much easier for all investors. While international accounting standards are not used by all listed and unlisted companies, more and more countries are making adoption a priority.
- International Accounting Standards Committee (IASC)
- International Accounting Standards Board (IASB)
- International Financial Reporting Standards (IFRS)
- The Growing Importance of International Accounting Standards; Arthur R. Wyatt, Chairman of the International Accounting Standards Committee, Heralds International Harmonization
- What Are the Benefits of International Accounting Standards?
- International Accounting Standards/International Financial Reporting Standards versus Vietnamese Accounting Standards