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Ias Ifrs History (1) - 1

The document discusses the history and evolution of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), highlighting their significance in harmonizing accounting practices globally due to the rise of international trade. It traces the establishment of the International Accounting Standards Committee (IASC) in the 1970s and the subsequent creation of the International Accounting Standards Board (IASB) in 2001, detailing key standards such as IAS 1 and IAS 2. The essay emphasizes the importance of these standards in promoting transparency and consistency in financial reporting across countries.

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13 views1 page

Ias Ifrs History (1) - 1

The document discusses the history and evolution of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS), highlighting their significance in harmonizing accounting practices globally due to the rise of international trade. It traces the establishment of the International Accounting Standards Committee (IASC) in the 1970s and the subsequent creation of the International Accounting Standards Board (IASB) in 2001, detailing key standards such as IAS 1 and IAS 2. The essay emphasizes the importance of these standards in promoting transparency and consistency in financial reporting across countries.

Uploaded by

Bruce
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Title: An In-depth Essay on the History of International Accounting Standards (IAS) and International

Financial Reporting Standards (IFRS)

Introduction

Accounting plays a pivotal role in the financial management of businesses and economies. With the growth
of international trade and the globalization of capital markets, it became necessary to harmonize
accounting practices across different countries. This need led to the creation and evolution of the
International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). These two
sets of standards have significantly transformed how financial reporting is performed globally. This essay
provides an in-depth exploration of their historical development, tracing their evolution from inception to
the current day, highlighting key milestones, amendments, and the rationale behind their existence.

The Evolution of International Accounting Standards (IAS)

The journey of standardized accounting began in the early 1970s with the establishment of the
International Accounting Standards Committee (IASC) in 1973. The IASC was formed as a response to the
increasing need for international comparability in financial reporting. Prior to the IASC, each country had its
own accounting standards, resulting in discrepancies in financial reporting practices that hindered cross-
border investment and global business operations.

The primary objective of the IASC was to issue International Accounting Standards (IAS) that would be
adopted globally, or at least serve as a benchmark for national standards. Over the years, the IASC issued
41 IAS standards, of which several were later superseded, replaced, or withdrawn. However, many IAS
standards are still in force, albeit in revised forms.

One of the first and most significant standards issued was IAS 1: Presentation of Financial Statements.
Initially released in 1975 and undergoing several revisions, IAS 1 laid down the framework for how financial
statements should be presented, ensuring consistency and comparability across reporting entities. IAS 1
requires entities to present a complete set of financial statements including a statement of financial
position, statement of profit or loss, statement of changes in equity, and statement of cash flows, along
with notes to the accounts.

Another crucial standard is IAS 2: Inventories, which was also released in 1975. This standard aimed to
standardize how inventories are accounted for, ensuring they are valued at the lower of cost and net
realizable value. It introduced methods for cost determination, including FIFO and weighted average cost
methods, to ensure uniformity in inventory reporting.

Throughout the 1980s and 1990s, more standards followed, addressing diverse areas of accounting such as
cash flows (IAS 7), income taxes (IAS 12), property, plant, and equipment (IAS 16), employee benefits (IAS
19), and foreign exchange transactions (IAS 21). The adoption of these standards promoted transparency in
financial reporting, minimized manipulation, and fostered investor confidence.

An important milestone came in 2001 when the International Accounting Standards Board (IASB) was
established, replacing the IASC. With the formation of the IASB, the focus shifted to developing new

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