What were the 'International Accounting Standards - IAS'
The international accounting standards (IAS) were an older set of standards stating how particular types of transactions and other events should be reflected in financial statements. In the past, international accounting standards were issued by the Board of the International Accounting Standards Committee (IASC); since 2001, the new set of standards has been known as the international financial reporting standards (IFRS) and has been issued by the International Accounting Standards Board (IASB). Although IASC has no authority to require compliance with its accounting standards, many countries require the financial statements of publicly-traded companies to be prepared in accordance with IAS.
BREAKING DOWN 'International Accounting Standards - IAS'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.
International Accounting Standards Committee
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) the IASB issues or a local variant of them.
International Accounting Standards Board
The IASB’s mission is developing the IFRS and bringing financial markets transparency, accountability and efficiency worldwide. A monitoring board of public authorities oversees the nonprofit organization and serves the public interest by fostering trust, growth and long-term financial stability for the global economy. The organization’s governance and due process keep its setting of standards independent of special interests while ensuring accountability to stakeholders around the globe.
Generally Accepted Accounting Principles
Generally accepted accounting principles (GAAP) refers to a set of rules, standards and practices used in the accounting industry for preparing and standardizing financial statements issued outside a company. The standards help investors and creditors better compare businesses.
Many countries and multinational companies would like the differences between GAAP and IFRS eliminated. Blending the two would help comparisons between businesses based in different regions. Advocates believe the merger would simplify management, investment, transparency and accountant training.
The main difference between the standards is that IFRS is principles-based and GAAP relies on rules and guidelines. The goal of the IFRS is to provide good information, whereas the standards offer guidelines on achieving that goal.