FINANCIAL REPORTING - INTERNATIONAL ACCOUNTING STANDARS - Essay Example

The IASC was founded by an Accountants’ International Study Group in the year of 1973 (Wood & Sangster, 2008). The IASB is an independent accounting setting body. After formally converting into the international accounting standards setting body, the IASB decided to develop, in the public interest, a single set of high quality international accounting standards(about Us). Since its inception, the IASB has been successful in introducing and implementing many fundamental accounting standards globally.

Many developed and under-developed countries have extended their support for the mission of the IASB. However, there are still certain areas where the IASB faces a real threat of challenges. Critical analysis of the IASB Has the dream of global international accounting standards received a reality in the corporate world? Many authors have no positive answer for this question. Additionally, many believe that a single international accounting body may create problems for many stakeholders (Lont, 2010).

To substantiate their point, they say that the international accounting standards of the IASB are voluntary in nature: The IASB has no legal authority to impose and implement these accounting standards on any entity. Since the IASB has no legal authority to enforce its own devised international accounting standards, it would not be easy for the IASB to ensure the global uniform application of the standards. Furthermore, soon after the creation of the IASC, Financial Accounting Standards Board (FASB) in the United States of America came into existence, creating a counter balancing force to the mission of the IASC.

In the same year of 1973, the FASB drafted its own accounting standards and implemented on the corporations working inside America. Till this point of time, the U.S. corporations follow the Generally Accepted Accounting Practices (GAAP), in other countries; the International Financial Reporting Standards (IFRS) are used. Also, the IASB faces some political challenges as well. The powerful waves of global financial crisis drowned the boats of many large multi-nationals between the periods of 2007 to 2009.

Many critics point out the fair value model used in the International Accounting Standards IAS 39 was mainly responsible in bringing the nightmare of global financial crisis. In October 2008, the IASB came under a severe attack from the European political leaders over the role of IAS 39 in the global financial crisis (Veron, 2010). Given to the severity of economic and financial situation, the IASB brought some reclassification amendment to the IAS 39 standard on the financial instruments (Veron, 2010).

Additionally, the FASB behaves like a competitor rather than a professional associate of the IASB. Recently, it has been announced by the IASB and the FASB that by the end of 2015, the IFRS would be enforced in America. This is an attempt to ensure the global uniform application of the IFRS; and this would bring a forward step movement of the IASB in attaining its global mission. However, this global mission received a serious blow when the FASB separately and independently developed and published its own visions on how to introduce reforms in the accounting of financial instruments (Veron, 2010).

Furthermore, the IASC Foundation has received many questions on its professional integrity towards achieving its mission. The European banking industry shares its many reservations over the many of the announcements of the IASC. This situation has created an environment of