Essay: Objectives of IASB Standards

Sample Essay

The main objective of IASB standards is to enhance the reliability, relevance, transparency and usefulness of financial reporting methods. IAS 39 and the proposed amendments to the standard are a part of this objective where users and preparers of financial statements can make informed and useful decisions. An agreement between two individuals or companies should be based on good faith and in the absence of good faith one party is subject to various risks in the agreement and these risks are referred to as moral hazards.

The fair value accounting system for financial instruments required companies to state financial assets at fair values which caused banks to start acting in good faith which eventually caused significant write down of values. Positive theory of accounting is mainly concerned with policies and procedures implemented by managers while preparing financial statements. The theory tries to predict the pattern of method choice and policy selection by managers for valuing and recognizing various assets and liabilities (Mattessich 2007). The use of fair value accounting for measuring and recording financial instruments is based on its positive impact on corporate governance in an organization and the use of fair value accounting as a tool for improving financial reporting is emphasized in the article.

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