What Are the Benefits of International Accounting Standards?

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The International Accounting Standards Board sets accounting standards across the globe. Unlike country-specific standards such as the Unites States' GAAP (generally accepted accounting principles), international standards have no governing authority to enforce them, making them purely voluntary. Existing international standards carry a number of distinct benefits to participants, and they serve as an early template for future globally regulated and enforced standards.

Ethics

Different countries and regions around the world boast very different cultures and norms, which manifest themselves in the prevailing business culture in the country. Some countries, for example, make bribery a rule of thumb in business, while others view it as highly taboo. International accounting standards set a unified code of accounting ethics to be followed across cultures. This simplifies disputes between companies in diverse parts of the world and helps companies comply with different legal guidelines around the world.

One major benefit of international standards is that they consider input from professionals and legal authorities around the world. This can create a set of ethical guidelines that do not favor one culture over another, as can be the case when a foreign company adheres to its own domestic ethical values.

Investor Benefits

International standards for accounting systems and the format of financial statements simplifies international investment decisions. Investors can compare the financial statements of companies following International Accounting Standards Board standards, or other international guidelines, regardless of the company's country of origin. Without standards, making comparisons becomes less reliable, as the information presented in financial statements is calculated using different methods. The adoption of international standards has allowed stock-trading exchanges to merge across continents and opened up a range of new investment opportunities to people all over the world.

Multinational Companies

International accounting standards also simplify accounting for multinational companies that have facilities and operations in multiple countries. Rather than using their home country's accounting standards in their foreign subsidiaries, multinationals can institute international standards across all geographical units to avoid confusion and increase the system's accuracy and efficiency. Standard accounting systems across all geographic units within a large company can simplify the process of transferring managers from one unit to another and can make cross-unit collaboration on financial matters more productive.

International Trade

Companies increasingly seek strategic partners, customers or suppliers in foreign countries. International accounting standards give companies a common financial language and understanding, making it easier for them to do business together. International standards also create an entirely new industry, international accounting consultation, creating new opportunities for entrepreneurs in any country.

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About the Author

David Ingram has written for multiple publications since 2009, including "The Houston Chronicle" and online at Business.com. As a small-business owner, Ingram regularly confronts modern issues in management, marketing, finance and business law. He has earned a Bachelor of Arts in management from Walsh University.

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