understand how those standards came about and how they differ from the American standards. At that point, the company can make an intelligent decision about whether it should maintain dual standards or a single standard, and whether that standard should be the American or international standard.
For many years, companies within the European Union have sought a single set of accounting standards rather than the multiple standards required by different nations. This concern has been most acute among large companies with operations in different countries whose subsidiaries had to follow multiple standards, but the concern was also felt by smaller companies seeking information about competitors and customers in various European markets. A recent survey showed that a majority of European companies believed that international standards would result in greater transparency, and that international standards would help make financial statements more reliable (Heffes 17).
The International Financial Reporting Standards (IFRS) went into effect in the EU on 1 January 2005. These standards were brought about as the European Union sought to standardize different national approaches to key financial statements. Like companies based in the United States, companies with headquarters in EU nations have long prepared financial statements·including balance sheets and profit/loss statements·for their shareholders. However, there has been no single standard across the various nations. While differences tended to be subtle, they could nonetheless result in material differences in reporting depending on which standard was used. The introduction of a single currency·the euro·made it easier for capital to flow across international boundaries in Europe, and the need for financial statements that would also be standardized increased ("EU Regulations" n.p.).
Various stakeholders are eager to see a unified set of standards in place. This will ...