Question

Difference between national and international accounting

Answer 1

Accounting Standards play critical role in setting
quality of disclosure and they not only cover historical
information but also future information.
The supporters of efficient market theory argue that
historical accounting information has no utility to investors
or other stakeholders because the market any way would
capture the impact of accounting information before its
formal disclosure. However capturing of such information
takes place over a period of time as and when the
accounting information is released in bits and pieces e.g.
many analyst predict corporate earnings based on sales
volume figure released by the company either directly to the
market or through industiy association. Accounting
information would also be useful in examining the long-term
impact of industry or business life cycles on the company
and its ability to face such cyclical trends.
Accounting information needs to be provided on a
consistent basis; otherwise, the information itself can create
volatility as over a long period of time it is not possible for
any management to smoothen the bad and the good news.
Often, firms are affected by the cumulative effect at some
point of time. Accounting Standards assume importance in
this context.



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