Accounting with Finance (Hons)
Advanced Financial Accounting Coursework
'Discuss the impact of the adoption of international accounting standards in the UK'
Most companies in today's world have to prepare some form of detailed record of its activities during the year. There are several users who require such detailed information, and therefore companies produce yearly accounts, showing items such as incomes, cash flows, and asset measurement. These users usually have a vested interest in that company; the most in need are probably investors, who have a monetary interest in the company, and directors who seek to maintain the financial well-being and future growth of a company, but there are also others who may take an interest. Creditors may be interested to know the likelihood that a company can honour its debts. In addition financial statements are required when a company produces its yearly tax return. A useful set of financial accounts provides shareholders with precise information about the value of their shares, levels of dividend receivable, and future value of their investments.
In addition the actions of directors are made clear and any actions adverse to the business' performance can be avoided. In the interest of fairness and comparability several rules and regulations known as standards apply to the writing of financial reports. These are enforced independent accounting bodies. In the UK the main body involved with the setting up of accountancy standards is the Accountancy Standards Board.
The accounting standards operated under by each country can vary, in something as basic as inventory evaluation, practices in major countries include:
* Cost (FIFO) (e.g. some Japanese companies)
* The lower of FIFO and net realisable value (e.g. general UK practice);
* The lower of LIFO and current replacement cost (e.g. common US practice).
Therefore existence of difference standards can lead to...