Financial Reporting Question & Answers Assignment

Financial Reporting Question & Answers - Assignment Example It eliminates all the alternatives associated with financial reporting. There are various benefits of standardization: Standardization of accounting rules enable multinational firms in developed nations to create significant employment opportunities in the job market. Professionals in accounting and other fields find it easy to relocate to other countries as a result of globalization for there is a common language in preparation of financial reports and accounts. For instance, countries such as Hungary and India forward their accounting duties to companies based in developed countries (Iatridis 2010). These firms spend less time trying to be in line with a country’s accounting policy and strict regulations as most of the rules are adopted from International Accounting Standards. Moreover, adaptation of globalized standardized accounting standards has made it easier for firms to centralize their training in accounting and increase the number of financial care centers. Transpare ncy of unified financial standards has a boost in division of labor in the global market thus it enables smaller investors to invest in other countries. Standardization of accounting standards promotes innovation. These standards give rise to new markets and products hence, creating a significant enhancement for innovations (Hesser, 2006). Consequently, innovation result to improved sales. Minus these standards, there would be poor quality products that might limit the boosting of innovation since the remnants of the stock could not be transferable to other places. Furthermore, unified standards enlarge the scale of inventive products thus in absences of the standardized standards, these products are hardly obtained. In developed nations, the International Accounting standards assists to converge the systems of accounting and reports made available for investors. This would support global financial investments and innovations (Hal, Henock 2007). Standardized accounting standards enh ance the ability for firms to forecast profits. This is a reliable opportunity for investors because the transaction cost goes down when specific national accounting regulations disappear. Companies cut on the costs of external auditing and employment of experts for the purposes of global comparison reports. International Accounting standards initiate stiff competition in auditing that reduces the inescapable costs for auditing. Unified accounting standards reduce the costs of capital. Most domestic investors run their businesses within their countries since financial reports are prepared in line with the known worldwide accounting standards that could be easily interpreted. For international investors, the most preferred financial reports should be made using the international standards and not the domestic ones. This reduces the cost of investing in foreign countries since there is no variation in rules of accounting and cost of creating financial reports. Therefore, standardized accounting standards lower the cost of capital because investors are in agreement with lower returns from business securities and a decrease in investment risk. Who has to comply with accounting standards? Accounting standards refer to specific principles, bases, conventions, rules and practices applied by an entity in preparing and presenting financial statements. This implies that those who have to comply with the accounting stand