The article is about the fairly high standards of accounting information in corporate financial reporting. The International Accounting Standards Committee (IASC) comprising professional accounting bodies of 85 countries who are also members of the International Federation of Accountants (IFAC) prepare the International Accounting Standards (IAS) to serve as a benchmark for setting national standards and/or to be used directly by Multinational Corporations (MNCs).

Cross-border capital flows in today’s liberalized economic conditions demand fairly high standards of accounting information in corporate financial reporting. Transparency and adequate disclosure of financial statements has enhanced decision-making and efficiency of resource allocation in the economy. In recent times, companies are increasingly raising capital and attracting major investors from outside their home countries. The World Investment Report (WIR), 2005 of the United Nations Conference on Trade and Development (UNCTAD) reveals that the stock of Foreign Direct Investments (FDIs) alone were estimated at US$9 tn in 2004. China remained the most favored destination of investors not only among countries in the Asian region but also among developing economies all over the world. A report of the World Bank also indicates that India ranks low among hot-destinations for FDI inflows into the country. Accounting research has shown that foreign investors are attracted to firms that use accounting standards with which they are familiar. Further, the findings of a recent research also suggest that the cost of capital is lowered for firms that adopt international accounting standards. Accounting standards are crucial for companies for effective participation in the global market. Simply stated accounting standards are accounting rules or principles on the basis of which accounting statements are prepared to fulfill the informational needs of various users like investors, creditors, employees, consumers, legal experts, analysts, governments and general public. Accounting standards deal
mainly with financial measurements and disclosures used in producing a set of fairly presented financial statements. The Reserve Bank of India’s Advisory Group on Accounting and Auditing, 2001 states that accounting standards help to promote sound financial systems domestically and financial stability internationally. They play an important role in strengthening financial regulations and supervision, enhancing transparency, facilitating institutional development and reducing vulnerability.

The Accounting World Magazine, Accounting Standards, Corporate Financial Reporting, International Accounting Standards Committee, IASC, International Accounting Standards, IAS, Multinational Corporations, Foreign Direct Investments, FDIs, Generally Accepted Accounting Principles, GAAP, European Union, Small and Medium Enterprises, SMEs, Intangible Assets.