Pros and Cons of the Implementation of Accounting Standards Essay

Pros and Cons of the Implementation of Accounting Standards - Essay Example The question also arises as to whether or not the accounting standards are effectual in improving the quality of accounting information or these happen to be a waste of time and money.The other matter concerns with the need for standardization of accounting standards in Europe, or in other words, is standardization the best possible solution to implement accounting standards in Europe. Hence, this essay encompasses the discussion on advantages and disadvantages of accounting standards combined with a discourse on the effectiveness of standardization in Europe.Accounting standards are basically the set of policies and procedures that are commenced by a specific body responsible for standard setting. Apparently, as the name suggests, these standards are set out to direct the recognition, preparation, and demonstration of accounting and financial information in a company's financial statements. Fogarty et al. (1994) describe accounting standards as the guidelines the purpose of which is to delineate a procedure to present transactions and outcomes in the company's financial statements. ... Therefore, the investors as well as the management, both remain aware of the standards to be followed for the preparation and presentation of financial statements. Formulation and implementation of accounting standards connote that there is uniformity of the procedure through which the companies account for various transactions, prepare the reports and present it to the shareholders. If the accounting standards are fair and unprivileged, it further suggests a binding investor trust in the company that all the information presented to him is true and fair devised and displayed under the prescribed standards. This, on one hand, leads to enhancement of investor confidence and on the other, maximises regulation on the companies to present a genuine picture of its position and performance. In short, the accounting standards are meant to enhance both, the investor trust and transparency. Moreover, when all the companies prepare their financial statements in full compliance with the accounting standards, it leads to the comparability between the financial statements of various companies for the purpose of improved decision making. It was this need for transparency, investor protection and comparability that led to the development of International Accounting Standards (IAS) to promote all these factors on an international level as a consequence of globalization. These accounting standards are also meant to serve all these functions but among international companies.