International Accounting: Objectives and Importance

You may have heard terms like International Accounting and International Accounting Standards, or you may have read the symbols IAS and GAAP. As the Qoyod Accounting website strives to promote accounting culture globally, we aim to elucidate the definition of international accounting standards, the rationale behind their establishment, and the advantages you stand to gain from adhering to these standards. In the process, you will learn the difference between generally accepted accounting principles and international accounting standards, as well as the best way to adhere to these standards in your accounting procedures, so follow along with us.

What is international accounting?

International accounting is an accounting specialty that is based on conducting accounting operations according to a few basic standards or rules that have evolved throughout history to preserve the general principles of preparing reports and financial statements with transparency and clarity, facilitating the inclusion of monetary data in records, and making dealings between companies locally and internationally more smoothly.

Every accountant needs to develop his skills in international accounting due to the global openness we are witnessing. Projects are expanding to include importing raw materials, exporting products, and exchanging trade between countries. This means that dealings occur between your company and other companies in different countries far from your home country. Therefore, when you appoint an accountant, you must ensure his international accounting skills and verify his commitment to worldwide standards.

Definition of international accounting standards

The International Accounting Standards Board has established International Accounting Standards (IAS) as the accounting guidelines for institutions and organizations to adhere to when preparing their financial reports. These standards aim to simplify the process, enable data extraction, and facilitate decision-making, even for accounting professionals from different countries and languages.

168 countries worldwide operate using international accounting standards, which specify global unified methods for filling out financial books and records for institutions and reporting their revenues and expenses. The goal of this unified method is to create a universal language that all accounting professionals around the world understand. Likewise, investors, company managers, and all those interested can exploit the data contained in these records to benefit the institutions themselves and the general economy.

The importance of international accounting

The specialty of international accounting has become in high demand in all parts of the world, as the need to record accounting data for projects and companies has increased and to convert them into lists and reports that comply with other accounting standards followed by the country in which the company you are dealing with operates commercially. Fortunately, these standards will be similar from one country to another due to their generalization and international adherence, except in specific countries such as China, America, Japan, and other countries that still follow their local accounting standards.

Objectives of international accounting standards

International accounting standards are considered a unified language used by accountants in various parts of the world to define the conditions of companies and what they need to enhance their success. This is the primary driving force behind the establishment of international accounting standards, which aim to achieve the following objectives:

• Maintaining trust and objectivity in the data provided about the company.
• Facilitating comparisons between companies to reduce companies’ loss rates and failure to achieve goals.
• Achieving transparency and clarity in presenting financial information for institutions.
• Facilitating cooperation between companies working in similar fields on an international scale.
• Increasing international investment opportunities and making it safer and less expensive.
• Make decisions about buying, selling, and trading currencies on the stock exchange more straightforward.
• Empowering departments to make the most effective decisions for their companies.

The importance of accounting standards for companies

It is important for companies to use international accounting standards to be able to provide the following:

• Clear and understandable financial reports and records for all corporate accountants globally.
• Enhancing confidence between financial markets and companies.
• Enabling companies to conduct performance analysis by comparing their performance with the performance of other global companies that are similar to them in some aspects.
• Developing accounting procedures to suit economic variables.
• Insuring companies against loan risks.
• Organizing debt repayment operations so that they do not affect the company’s financial capacity and promote increased profits.
• Prevent theft and embezzlement thanks to unified and clear data.

Generally Accepted Accounting Principles (GAAP).

It is a set of principles followed by some countries. It is distinguished by a set of standards developed by the Accounting Standards Board and adopted by companies when recording and reporting their financial statements to ensure the submission of complete financial statements. 12 principles come as follows:

• Revenues.
• The relative importance of registration.
• Objectivity.
• Intangibility.
• Expenses.
• Non-compensation.
• Independence of practices.
• Conformity.
• Good information.
• The cost.
• Permanent methods.
• Fair view.

International Accounting Standards

There are 41 international standards for accounting procedures between companies, divided into two parts: accounting standards, which include 34 standards, and standards for preparing reports and financial statements, which include 7 standards. We summarize these standards as follows:

1. Inventory valuation.
2. Include leases.
3. Submitting construction contracts.
4. Mention declines in asset value.
5. Providing interim financial reports.
6. Recording real estate investments
7. Recording investments in associated companies.
8. Use retirement plans for reporting.
9. Include the cost of loans.
10. Determine earnings per share.
11. Include discontinuous operations.
12. Business combination accounting.
13. Recording financial instruments.
14. Use separate financial statements.
15. Use of financial instruments.
16. Recording planting and harvesting data.
17. Submitting a report on the company’s sectors.
18. Transparency and disclosure in banks’ financial statements.
19. Determine the effects resulting from exchange rate changes.
20. Submit documents describing the impact of price changes on the market.
21. Follow accounting policies.
22. Revenue recording.
23. Allocation of potential assets and liabilities.
24. Including shares in joint projects.
25. Provide details of government grants and aid.
26. Disclosure of information that must be disclosed in the financial statements.
27. View current assets and liabilities.
28. View cash flow data.
29. Recording events after setting the budget.
30. Submit high-inflation reports.
31. View financial reports.
32. Include related parties.
33. Recording retirement benefits.
34. Identify intangible assets.
35. Investment accounting.
36. Do not hide any accounting information related to the property.
37. Calculating the cost of development and investment.
38. Calculate income taxes.
39. Use consolidated financial statements.
40. Construction contract account.
41. Asset depreciation calculation.

There is a difference between international accounting standards and generally accepted accounting principles.

While international accounting and conventional accounting share several common principles, there are some differences that could influence business practices, such as:

The best accounting program compatible with international accounting standards

You can easily follow international accounting standards with Qoyod accounting software, which provides you with unlimited features, including the following:

• Security due to its protection and encryption system.
• Confidence in performance. The system is affiliated with the Zakat, Tax, and Customs Authority, which means that it is government-approved in the Kingdom.
• The best experts follow the program, and this indicates that the program has won several awards despite its short period of service in the business sector.
• The prices for using the system are competitive, and its packages provide a number of options and features that you cannot do without.
• You do not need to install the program to use it, although you can do so if you wish. You can use it without downloading because it is a cloud program.
• You can use the system in both Arabic and English.

Conclusion

We provided you with details on the difference between international accounting standards and generally accepted accounting principles. We also learned about the importance of international accounting and the necessity of teaching it to accountants from all countries so that they can keep pace with business developments and partnerships between institutions. To make things easier for you, we have made it possible for you to try the Qoyod accounting system for free for a limited time so that you can learn about and follow the most advanced international accounting methods. Click the link here and start enjoying accounting like you have never done before.

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