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- With the rapid growth in cross-border investment over the last two decades there has been an increasing demand for high-quality,uniform financial reporting.The importance of relevant information is such that the investors are on the constant lookout for reliable and accurate information not only of the company but also of their competitors wherever they may have been situated in the world.
- Financial reporting varies from one country to another country. Different countries follow different accounting policies, principles and formats. International Accounting Standards board gave a framework for preparation of financial statements and their presentation.It is not a standard it is only guideline.
- Every country has its own GAAP.To harmonize the accounting standards, International Accounting Standards Board is developing standards which are known as International Financial Reporting Standards.These standards are useful especially for multinational companies.
- There is a lot of diversity in the accounting field due to legal systems,taxation policies and cultural differences.This diversity obstructing the companies to enter into foreign markets.Multinational companies are facing key personnel and increase in cost problems.
- After scandals in the beginning of this century, to restore the investors' confidence and to strengthen the corporate governance,the US government passed the Sarbanes-Oxley Act,2002.It laid down new accountability standards for corporate boards and auditors.