According to statistics from the World Federation of Stock Exchanges, the value of trading in foreign companies accounted for 9.75% of all trading on the major stock exchanges in 2002. This citation, also part of the Tweedie, D. Article in the Northwestern Journal of International Law & Business from 2005, shows how much, over the years, the world's economy has grown, and with it, also have international investments.
When companies used to seek for investors only from their home country, they are now able to do so on a global scale. Not only has the role of capital markets increased but its complexity and scale as well. One country's accounting standards are not always similar to another's, each highlight different information depending on the way they are built. In order for these capital markets which now represent a central role on today's economy to continue functioning effectively, there is a need of sound financial reporting infrastructure.
How do we achieve this? Over the years several methods have been developed and we shall see what the strengths and weaknesses of several of them are and how can they still be improved.
[...] Effective corporate governance and internal control as well as reliable auditing practices enable the markets to have confidence on the information that they are transmitted. By making sure that all of these measures are put into place and respected policy-makers will be able to assure themselves of the continued effective functioning of the market based upon a sound financial reporting structure. References. Articles. - BARTH, M and LANDSMAN, W. (2008). International Accounting Standards and Accounting Quality. Journal of Accounting Research. Volume 46, Issue 3. pp.467-498 - BBC News. (2002). Enron scandal at-a-glance. [...]
[...] Accounting, Organizations and Society. 20, 7/8, pp.639- 664. - Roe, M. J. (2005). The inevitable instability of American corporate governance. Corporate Governance Law Review, 1(1), pp.1-19. - Sir David Tweedie (2005). Setting a Global Standard: The Case for Accounting Convergence. Northwestern Journal of International Law & Business Vol.25, pp.589-608. - Tarca, A. (2004). International Convergence of Accounting Practices: Choosing Between IAS and US GAAP. Journal of International Financial Management and Accounting 15. pp.60–91. Websites. - Europa. International accounting standards. Summaries of EU legislation. [...]
[...] National accounting practices are not all similar. They have different measurement principles, financial disclosure levels and auditing practices. The goal of a set of International Accounting Standards (IAS) is to elaborate a set of practices that are the same in each country in order to have more efficient capital markets. In order to do so it is important to first of all understand the causes and nature of international differences in accounting standards. Depending on several environmental influences, accounting standards vary. [...]
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