International Accounting and Finance

Since 2005, companies listed in the European stock exchange have to present their financial statements in accordance with the International Accounting Standards (IAS), rather than comply with their national reporting standards. According to the European Parliament, the creation of such standards ‘facilitate the movement of capital; remove barriers to cross-border trading; permit comparison of company results; and assist the evaluation of managerial and corporate performance.’ (Stittle J, (2004) page 1)
Indeed, the adoption of IAS was supposed to bring a large number of benefits, but the experience has proven so far that listed companies have also faced confusion and challenges.
The comparison of financial statements between various countries before 2005 was not an easy task for investors, due to many differences in individual national reporting standards.

[...] In 2001, the International Accounting Standard Board (IASB) was established to replace the IASC, and the IFRS norms were created in order to be the basis of international reporting standards. By 2005, a large number of countries chose to adopt IFRS as their own accounting standards, at the expense of their national reporting rules. Moreover, the adoption of IFRS has not only been limited to European listed companies. Indeed, many unlisted companies chose these accounting reporting standards, and most of them were located in different continents. [...]

[...] and Wayne (2008) International Accounting Standards and Accounting Quality, Journal of Accounting Research Vol June 2008 Rajagopalan N. & Zhang (2009) Recurring failures in corporate governance: A global disease?, Business Horizons pp 545-552 Hope (2003) Disclosure Practices, Enforcement of Accounting Standards, and Analysts' Forecast Accuracy: An International Study, Journal of Accounting Research, Vol May 2003 Stittle (2004) The Reformation of European Corporate Reporting, Towards a model of convergence or confusion?, European Business Review Vol pp 139 Ashbaugh H. & Pincus (2001) Domestic Accounting Standards, International Accounting Standards, and the Predictability of Earnings, Journal of Accounting Research, Vol 3 December 2001 Gray S. [...]

[...] The primary objective of International accounting harmonisation was to enable investors to get a better approach towards the comparability of financial statements, to increase accounting practices’ reliability and to reduce the risks in capital markets. Even if it has mainly been the case, investors also met a certain amount of challenges listed above. According to Sir Tweedie, the concept of effective corporate governance is an important point to ensure the good functioning of capital markets and to fight against these challenges. [...]