Lecture 1 International Financial Reporting Standards
We have discussed that accounting is a measurement and communication system. In this system, the accountant is trying to convey a message about the firm to the receiver or the user. Depending on how the message is conveyed, the user will obtain an image of the firm that will enable him to make an appropriate decision. If the message is unclear or fuzzy, it would project an inaccurate image of the firm. This will confuse the user, and result in him making a wrong decision. If this is a large company, that wrong decision could cause the user to suffer tremendous losses. Since in most cases these users are external to the company, for example the shareholder, they have no choice but to rely on the message conveyed by the accountant. Therefore, there should be some form of control over the quality of the message prepared by the accountant. This control comes in the form of accounting standards that prescribes the way the message or financial report is prepared.