Hi guys,
Sorry for the break.
We shall be studying accounting standards today!
Let's start with this scenario. There is an inter-country race involving over 50 countries. In preparation for the race, each country was asked to send over its own representative to prepare the track, stadium and other necessaries. In the course of this, a problem started. The different countries had different measurements, hence there was serious difficulty determining 100m, 200m and 400m. For the Japanese, 50 straight bamboo sticks equaled 100m; whilst 100 leg strides equaled 100m. For the Nigerians', 20 big palm fronds represented 100m. This led to a serious disagreement amongst the countries, and there was no harmony in measurement.
However, someone suggested the use of metric rule, which clearly marked 100m, 200m and 400m and it was accepted by all. Hence, solving the problem.
That is the basic idea behind accounting standards. Before now, different countries all over the world had different rules and methods of financial reporting based on their laws and conditions prevalent and unique to them.
However, there was large dis-harmony and very great difficulty in comparing financial statements as well as information of the different countries. The world as we all know, is now a global village, we have several cross border transactions. For example, the stocks of Nigerian banks are quoted on the London and New York Stock Exchange. As a result, the shareholders and investors need information as regards their investment. But, it was difficult to compare and comprehend due to variety in accounting standards. Hence, the birth of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS).
Just like the metric rule brought about uniformity and harmony, so also, these standards ensure uniformity in financial reporting. This means that, Nigeria, U.K, and all other countries that adopt the IAS and IFRS would have their financials (statement of financial position, profit or loss etc) stated in the same manner. This is known as "Convergence". It ensures uniformity and easy comparison.
We shall weigh the arguments for and against these standards in the next post.
DAY'S CHALLENGE:
Give related scenarios like that of the metric rule to illustrate the meaning and use of accounting standards. Comment below and let's get learning!
For further clarifications, mail: nneomakristen@gmail.com
Have a wonderful day!
Sorry for the break.
We shall be studying accounting standards today!
Let's start with this scenario. There is an inter-country race involving over 50 countries. In preparation for the race, each country was asked to send over its own representative to prepare the track, stadium and other necessaries. In the course of this, a problem started. The different countries had different measurements, hence there was serious difficulty determining 100m, 200m and 400m. For the Japanese, 50 straight bamboo sticks equaled 100m; whilst 100 leg strides equaled 100m. For the Nigerians', 20 big palm fronds represented 100m. This led to a serious disagreement amongst the countries, and there was no harmony in measurement.
However, someone suggested the use of metric rule, which clearly marked 100m, 200m and 400m and it was accepted by all. Hence, solving the problem.
That is the basic idea behind accounting standards. Before now, different countries all over the world had different rules and methods of financial reporting based on their laws and conditions prevalent and unique to them.
However, there was large dis-harmony and very great difficulty in comparing financial statements as well as information of the different countries. The world as we all know, is now a global village, we have several cross border transactions. For example, the stocks of Nigerian banks are quoted on the London and New York Stock Exchange. As a result, the shareholders and investors need information as regards their investment. But, it was difficult to compare and comprehend due to variety in accounting standards. Hence, the birth of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS).
Just like the metric rule brought about uniformity and harmony, so also, these standards ensure uniformity in financial reporting. This means that, Nigeria, U.K, and all other countries that adopt the IAS and IFRS would have their financials (statement of financial position, profit or loss etc) stated in the same manner. This is known as "Convergence". It ensures uniformity and easy comparison.
We shall weigh the arguments for and against these standards in the next post.
DAY'S CHALLENGE:
Give related scenarios like that of the metric rule to illustrate the meaning and use of accounting standards. Comment below and let's get learning!
For further clarifications, mail: nneomakristen@gmail.com
Have a wonderful day!
Really nice post.. keep it up
ReplyDeleteThanks a lot Deji!
DeleteCool and original ! :D
ReplyDeleteThanks Nelly!
DeleteNice post! In response to d challenge, taking Nigeria as an example; wedifferent tribes /ethnic groups with different languages, thereby causing lack of understanding and disunity among the Nigerian
ReplyDeletecitizens. Making English our lingual franca, brings about unity and understanding amongst different tribes in Nigeria.
Yes just like the standards! Nimah, this is a good scenario!
ReplyDelete😉
ReplyDelete