EU Accounting Standards – Coursework Example
European Economic Community was formed in 1958. Before fits formation, many countries had developed their own national account systems, which they used to present the country’s expenditures, incomes, gross domestic product, and other important economic information of the various economic actors. Therefore, the EEC had to set several standards in their accounting system in order to harmonize the financial reporting practices and methods used to present financial information by member states and the companies within the bloc. The paper discusses the impact of the harmonization of these reporting practices. It explores how this has affected the economic performance of the region. In 2002, a legal requirement was introduced requiring all European companies that were listed in the major European stock markets to prepare their consolidated financial statements using the International Financial Reporting Standards (IFRS) (Dewing & Russel, 2008). Consequently, all companies listed in the European stock markets prepare their financial statements using IFRS since 2005. This could have alienated the stock exchange markets from the region with the rest due to their unique practices. In addition, the union established a national accounts system known as the European System of Accounts (ESA) to be used by its member states and to provide detailed economic data for the whole union. This national accounting system is consistent with the System of national accounts and the paper puts into perspective the impact it had on the trading bloc. Further, the various factors influencing the accounting standards in the EU are discussed in detail in the paper to depict the conveniences brought about by the ESA. These factors were taxation system in the member countries, similar reporting system as well as cultural factors.
Dewing, I., & Russel, P. (2008). Financial Integration in the EU: the First Phase of EU Endorsement of International Accounting Standards. JCMS Vol 46. (2). pp. 243–264