Accounting standards and IFRS adoption in Cambodia and Thailand The significance of accounting standards

Accounting may be considered as a business language through which the statistical results can be acquired which help in analyzing how well the firm is functioning. They give out timely statements of these statistics and help the stakeholders get all the information they need. Accounting is like a separate language which has its own grammar and these outlines and rules are referred to as the accounting standards. The main aim of the accounting standards is the threefold. This method is very useful when it comes to setting a certain standard for the various policies involved and diminishing the failure to compare the financial reports with the numerous entities involved. Another role they play is that of the facilitation of the depiction of the quality of the firm and its performance as the statements reveal the relevant data in a clear and distinct manner. The entire information is revealed in a manner where the subjective elements are greatly eliminated and they reveal the picture pretty clearly (Alali and Cao, 2010).

Standards of deriving the global financial reports:

The process of globalization in the financial markets has led to a growing emphasis on the standards that are to be maintained in the global market in accounting terms and has made increased efforts to acquiring the best standards which go along with all the internationally approved standards. The statements that are made in each country differ from each other according to certain laws, rules, standards, etc. because the analysis and assessments about each transactions differ. Hence, this sometimes becomes very difficult to interpret because the methods of analysis are different which makes comparison, analysis and assessment quite difficult among different countries (Baker, 2008).

The system and procedures of reporting these statements has a basis of excellent governing, the best quality and standard and lastly a structure upon which to work on for the process of economic development. The standards for the reports however form a basis for the investors and stakeholders to build a sense of trust in the analysis of these reports which therefore play a significant role in the contribution to development of the nation as a whole. It is also obvious that the globally acceptable standards therefore play an important part in the whole procedure (Epstein, 2009).

In relation to this, the significance of an entity like International Accounting Standards Board (IASB) which plays the role of a separate internationally recognized entity automatically increases. The main roles and motives that the IASB holds are the following (Epstein, 2009):

a. IASB, a body for setting standards, will be responsible for developing a single set of IFRSs (International Financial Reporting Standards) that will be globally accepted, shall be enforceable, easy to understand, and of high quality (Epstein, 2009);

b. usage of those standards shall be encouraged (Epstein, 2009);

c. SMEs, medium sized organizations, and emerging economies are characterized with certain financial reporting needs, which will be highlighted (Epstein, 2009);

d. High quality solutions shall be provided by converging IFRSs and national accounting standards (Epstein, 2009).

It will be easy to compare different organizations having varied accounting standards if global accounting standards are converged under IFRSs. The cost of compliance and capital for the industry will be reduced as organizations will not be required to have multiple accounting standards for judging their organizations. It is very expensive and time consuming when organizations convert to a single standard during group reporting. Moreover, as there will be no friction in capital inflows and investor's confidence would increase in global accounting standards, cost of generating foreign capital will decrease while investment will increase (Tribunella, 2009).

The future for IFRSs is promising since many economies are looking forward for converging with or adopting IFRSs. Hence, the route towards IFRSs is quite smooth. Furthermore, various stakeholders of IASB, such as personnel from academics, auditors, regulators, national standard setters, and investors; along with IASB itself are engaged in promoting such global standard of high quality (Tribunella, 2009).

Lessons from the financial crisis

Pro-cyclical amplification that occurred in the form of various financial shocks throughout financial markets, banking system, and an economy as a whole, were regarded as the basis of global financial crisis. Numerous channels are identified as a source for pro-cyclical amplification, like consumers, firms, and financial institutions witnessed leverage; margining prices; accounting...

In addition to this, other destabilizing elements were the ignorance of exposures related to derivatives, and other on- and off-balance sheet risks (Sunder, 2009).
The points outlined in the IAS 39-Financial Instruments-Recognition and Measurement which was devised by the International Accounting Standards Board (IASB) lays out the main points that are to be kept under consideration while gaining a recognition and measuring the company's assets and liabilities in financial terms. The results of these derivations are very important for the banking institutions and the NBFCs which focus on these tools used to make statistical analysis. The IAS 39 focuses on classifying the various financial tools, their methods of measuring the elements and thus the process of derecognizing. The points discussed under IAS 39 can be applied internationally to a variety of financial tools (Sunder, 2009).

After this crisis situation, it brought about varied opinions where some people were very critical of the standards adopted and suggested that the fair value accounting had a heavy impact on the financial crisis overall and in some ways exaggerated the situation and increased the intensity which eventually led to the failure and the markets becoming illiquid and the sales dropping down (Sunder, 2009).

The team G. 20 which was working on the "enhancement of the sound regulations as well as strengthening the levels of transparency" suggested that there was a need for the loans loss suggestions to be strengthened and the makers of these provisions should actually consider devising some alternate methods in order to recognize and measure the losses brought about by the loans which bring about more options available for credit. The G. 20 group also went on to suggest that the International Accounting Standards Board (IASB) should pay more attention towards the move to regulate the global turn towards single sets of accounting techniques which meet high standards by bringing together and learning from the exposure gained by the other countries who have already used this process and are able to extend some form of technical help and assistance. Another suggestion that they made was about the attempts to make these standards a bit easier and less complex so that the tools can make the presentations better off and make it easier for the statements to be analyzed and assessed and attain a clear view and evaluation of the financial tools (Catty, 2010).

The Requirement of Adopting International Accounting Standards

The newly established markets generally face limited opportunities where they have to stick with what they get. They usually have to join into the process of globalization in order to pace up their trade processes and become fully involved in that. The main aim that they enter the market with is usually that of speeding up the industrialization process in order to make up and mould their financial institutions. To make this possible, it is essential for them to acquire funds from external sources whereby they can pool in investments to build up on the infrastructure facilities and establish a well networked system of manufacturing and producing according to what their capacity allows them (Major and Marques, 2009).

The newly established markets hence get a limited frame of choice and have to collect their funds from external source that would be willing to link these financial institutions and the capital markets to the rest of the world. They have to be quite competitive and be focused if they wish to remain in the market along with numerous other markets that are entering and competing for the capital from abroad. Hence if they want to stay in the market, they have to adopt all the internationally recognized standards that have been specified by the International Financial Reporting Standards (Major and Marques, 2009).

If one carefully studies and look into the capital standards which were derived by the committee working under the Bank of International Settlement, we can notice that none of the nations were forced to adopt these standards and ideas but even so all of them were quite eager to adopt them. This came as a huge shock to those who were actually a part of the making process too. The countries started recognizing the fact that if they failed to abide by the standards and did not adopt the BIS capital standard, then their locals would obviously face drawbacks by having less trading limitations. They would also have a limited borrowing line and it would generally cost them more if they want to engage in any work internationally. Hence, most of the countries end up adopting the standards in order to ease things down for themselves (Ball, 2009).

There are certain issues that are brought about by having globally accepted standards. Some…