Accounting standards are a system of rules and regulation. It describes how a company must disclose and report financial statements. It also prescribes the form and content for the disclosure of the financial information of the business. The accounting standards set accounting practices for communicating the financial position of the companies to investors, government, employees and other users of accounting information. It covers various topics like how to account for depreciation, inventories, research and development cost, income tax, investment etc. all other assets and liabilities of the business. However, International accounting standards are the older version of the accounting standards issued by the International Accounting Standard Board (IASB). The IASB is an independent body based in London that sets the standard for accounting practices. From 2001, International Financial Reporting Standards (IFRS) have replaced the IAS.

Importance of Accounting standards

1. Every business in the world complies with various rules and regulations within the country and outside their country. Here the international accounting standards play a very important role as countries across the globe have different practices and cultures. The IAS (now IFRS) sets a uniform code of accounting standards for reporting. These standards include valuable inputs from accounting professional and legal authorities around the world. It ensures uniform guidelines that all businesses must adhere to ensuring the efficiency, transparency and accountability.
2. Having standards simplifies the international investment decision because then everyone follows standard accounting practices. It helps the investor with a more informed decision as they can compare the financial statements of companies that follow the IASB guidelines regardless of their origin. Thus more financial information is more reliable and enables better investment decisions.
3. AS simplify the accounting for the multinational companies located and operated across the globe. The multinational companies can rely on the accounting standard for reporting of all geographical units within the large companies. Thus, it simplifies relocating managers from one geographical unit to the other and makes cross-collaboration on financial matters. It not only increases productivity but also reduces reporting and regulatory cost otherwise incurred if each geographical unit’s standards are followed.
4. With consistent and accurate disclosure of financial statements of the business, it helps the government to determine the tax liability of all the business entities. The government can collect a fair share of the taxes from them.