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International Accounting Standards

 1.  Executive Summary

International Accounting Standards started in 1966 till now are being implemented in the organizations and can be considered as implications for all the organization in order to produce the financial reporting so that it can be compared with its previous reports or with the reports of the other organizations. However the implications of International Accounting Standards are not limited to the financial reporting only, there is a wide range of compliance that it covers. On the other hand, it is also helpful in improving the process of the different organizations. In this paper, we will be discussing the implementation of International Accounting Standards that are being applied in the organization of Gulf countries mostly including, Bahrain, Saudi, Kuwait and some other countries like Italy. The application of IAS being discussed in this chapter will not be limited to the only kind of organization only while it will also cover different organizations like banks and accounting firms. The literature review will discuss the aim, methodology and the results of each of the study that will be taken into consideration while covering the international accounting standards being implemented in the organizations.

2.  Introduction

International Accounting Standards are designed by the International Accounting Standards Committee in order to present the reports company accounts in a presentable form so that it can be easily understood and compared with the other reports within the company and with the other companies as well. These standards started back in 1966 and have now been adopted by a number of companies over the long period of time as they are consistently following the rules set by the IASC. There are 39 standards that are set by the IASC for accounting that are meant to be achieved in order to obtain the harmonization of accounting standards.  However these standards are not all to be applied in all the organizations because these standards have different implication depending on the region of the business, moreover not all the standards are applicable in the real world scenario. These standards can be taken as the guidelines that are minimum requirements which the companies and organizations need to follow.

3.  Literature Review

Paper 1: Empirical Study of Compliance with International Accounting Standards (IAS-1) By Stock Exchange Listed Companies in Bahrain


The aim of this study is focused on the examination of to what extent the standards set by the International Accounting Standards -1 is being followed by the organization that working in Bahrain. For this purpose, only 37 companies were taken who are registered with the Stock Exchange listing. These companies claim to be following the IAS in order to present the financial statements. In this study, we will come to know what aspects are in compliance with the IAS-1 standards of the organizations in terms of financial statements. This study will also help in the identification of the difference between the large and medium organizations statistically.


It is cleared that the IAS-1 were to be tested only with the 37 companies that were registered with Stock Exchange listing, the next step that were the minimum requirements or the set of rules for checking the compliance with standards set by IAS -1. Only ten requirements were to be tested with the organizations, while there were other requirements as well. It should be clear that there were 41 registered companies with Bahrain Stock Exchange but the reports of only 37 companies were available so these companies were to be tested or checked for IAS-1 compliance. The data was collected from the reports of these companies in 1999. The requirements or the compliance items to be checked were comparabilities, dividends, going concern, descriptions of reserves, disclosure, reclassifications, and components of financial statements, timeliness, stock information and compliance.  The financial statements of the companies were reviewed to check the hypothesis.


The hypothesis was developed regarding the aforementioned components in order to check the compliance of the companies with the IAS-1. Once those hypotheses were checked with the financial reports of the companies it was proposed that only two hypothesis were accepted that were are the timeliness and the description of the reserves. 46 percent of the companies showed timeliness in their financial statements by February and 29.7 showed in March that shows compliance with the regulations of IAS-1. This shows that the most of the companies who are registered with the Bahrain Stock Exchange show a fair compliance with the requirements of standards set by IAS-1.

 Paper 2: The Impact of IAS and BASEL II Regulations on Net Interest Margin: Evidence From Italy


The basic aim of this study is to analyze the impact of operating under IAS and BASEL II regulations. This impact is in terms of increased cost of the margin interest and especially in the banks of Italy. More specifically, it is to find out whether the operating costs of IAS and BASEL II Regulations are increased and secondly it is to find out if the diseconomies that are related to the compliance for mutual banks of Italy are present or not. These finding will be examined with the help of empirical analysis of the banks in Italy.


The methodology used in order to find out the impact of IAS and BASEL II Regulations contains three basic processes that are variable definitions, econometric modeling and Data Sources and Descriptive Statistics. In variable definition, two independent variables were considered one is net interest margin cost and the second one is operating cost. Once the variables were defined then they were put through regressions of the defined variables. Those regressions are done using the estimation technique, two technique for each of the regression.  Lastly, the data was extracted from reliable sources Abibank database.


The results of this study have clearly shown that the implementation of IAS has surely improved the transparency and homogeneity of the organizations as it has given the favor of comparability.  Moreover, BASEL II has been helpful in decreasing the cost in order to minimize the unexpected losses. This paper does not completely clear how the margin interest costs and operating cost of IAS and BASEL II separately, however, it shows the combined effect of the cost. On the other hand, the mergers between the banks can also cause an increase in the operating cost.

Paper 3: The IAS/IFRS application on the intangible assets of non-listed companies


The aim of this study is to find out what are the intangible expenses that are mostly found in the organization however they are missing on the balance sheet because of the introduction of International Financial Reporting System. This study will focus on the implementation of IAS-38 and what will be the outcomes of that standards. For this purpose, this implementation will be done on 99 Small and Medium Enterprises and 29 large firms. Because of the absence of intangible expenses from the balance sheet, there is a loss in the intangible assets, on the other hand, the tangible assets on the sheet are capitalized. This study will focus on how IAS-38 implementation will be helpful in controlling those intangible expenses.


In order to find out the impact of the application of IAS-38 on the non-listed companies who have been facing loss in the intangible assets, there were certain steps that were taken on the specific duration of the financial year starting from 1st Jan 2005 to 31st Dec 2005. The following changes were made one was that the startup and expansion expenses were not considered to be intangible expenses, the reason is that IAS-38 does not consider them as intangible expenses. The reason is that they are part of the definite expansion of the organization. The second change that was made in the organization regarding the intangible assets was the inclusion of Research and Development process expenses. However, there was no change in the amortization plan of R&D department. There are other intangible assets that are to be defined according to their nature that expenses, liabilities and intangible assets. These assets were classified and were tested in two different cases. In the first case, they were treated as normal and while in the other case they were treated with reclassifications.


The results obtained from the empirical studies with the reclassification of intangible assets show that there is a certain decrease in the intangible assets because they were redefined and in some cases went through amortization process. However, there are certain requirements that are needed to be obtained in order for the implementation of IAS-38 in the organization that is writing several intangible assets of the organization. Moreover, the other intangible assets like trademark and goodwill which are of indefinite useful life are subject to an impairment test.

Paper 4: The Value Relevance of Accounting Numbers and The Implications for International Accounting Standards Harmonization: Evidence from Saudi Arabia and Kuwait


This study aims to find out that whether the implication of International Accounting Standards and accounting number can be a major force in the determination of value relevance in the different organizations. The main idea of this study is derived from the fact of adoption of harmonization efforts that can be helpful in the increase of comparability of the financial reporting. This report will focus on the comparison between the relationship reported financial figures and the stock prices and returns to the US, Saudi, and Kuwait.


In order to find out the impact by the implications of international accounting standards harmonization’s in the difference of value relevance, there is needed for the performance of four comparisons between the countries that are Saudi and the U.S., Kuwait, and IAS-sample, Saudi and Kuwait and the U.S. and IAS sample.  The first study of the Saudi companies who have adopted the U.S more detailed and complicated rules for financial reporting has said that they are not guaranteed in order to provide useful information to the investors. In the same way, the remaining countries and the regulations adopted by them were compared and the results were examined. The analysis was done on the basis of two types of a valuation model to find the value relevance of the accounting numbers that is the price model and the return model.


The results show that the value relevance between Saudi and Kuwait are comparable, the reason is that there is no significant difference between coefficients test for conservatism. On the other hand, the value relevance between U.S. and IAS-sample is comparable but in some cases. The results obtained from the following comparisons show that these difference are mostly caused by the institutional factors which means that these difference are driven by the factors.

4.  Methodology:

The method used for this study is to get the official financial reports from the organizations that were under discussion, then the following rules and implications were applied to them. Then the reports were analyzed and tested for the following hypothesizes purposed in the studies, those hypotheses were then tested on the basis of the graphs and charts from the financial reports of the organizations. The results obtained from the hypothesis were recorded and checked if the implications of IAS standards in different organizations have been successful in their purposes or not. Those results were noted down and saved for further researches in IAS. The hypothesis was designed on the basis of the comparisons that are needed to be checked for the compliance with the International Accounting Standards.

5.  Discussion and Analysis

International Accounting Standards have been formulated in order to make the comparison of the financial reports within the same organization with the previous reports and with the other organizations as well.  There are certain benefits as well of following these standards as well because the organizations have been found benefiting from its adoption. Considering the first paper, it is eminent that IAS-1 is specifically for the financial reporting presentations, or it can be said that it is a format that should be followed in order to make the reports presentable and comparable.  Considering the hypothesis that was produced in order to find out the compliance of the organizations with IAS-1 it is eminent that the organization are following most of the requirements or standards out of 10 that were checked for. Only two hypothesis was proved true in sense of supporting the IAS adoption by 37 organizations. The table shows the facts that support the purposed hypothesis.

In the same way, the other hypothesis of the description of reserves was proved, the figures were taken from the officially published financial reports of the 37 organizations registered with Bahrain Stock Exchange.

In the same way, the banks in Italy were studied for the increase in operating cost and interest cost margin after the implementation of IAS. It has been seen that the International Accounting Standards has been adopted by the different organization mostly, depending upon the nature of the business they are doing. On the other hand, the organizations who have adopted the IAS and its different levels. The International Accounting Standards have proposed different solutions to the organization according to their nature of the business and the region they work in. The best example is the solution to the intangible assets in the organization that can be covered and minimized with the application of IAS-38.

6.  Recommendations:

The international accounting standards are the best way to produce the financial reports and to move the process of the organizations in a very smooth and efficient way. This lets the organization minimize the operating cost and also the risk factors that the organization may be facing for example unawareness of the trade and business and the best example of such businesses exist in Gulf countries. In those countries, the organizations have to adopt the International Accounting Standards in order to keep a record of all the trades they have been conducted in the region.

7.  Conclusion

The above studies have shown how the international accounting standards are being adopted by most of the organizations and how the organization is getting benefit from it. The international financial reporting standards and the increase in the operational cost of BASEL II have been few of the challenges, however, the implementation of IAS also present some of the benefits to the organizations. The International Accounting Standards are not only being followed in Europe of U.S. while the Gulf countries like Saudi, Bahrain, and Kuwait are also relying on the adoption of these standards. Out of 39 standards set by IASC, some of them are able to be implemented in the organization in the real world. Considering these standards with a wide range of possibilities and dimensions, IAS are being implemented in Banks, Organizations, Stock Companies etc. There is no specific organization in which these standards can be implemented only. However, these standards are helpful in every organization that is dealing with the finance and accounting in order to manage the records and the sales and returns. IAS range from 1 to 41 and covers a wide range of implications in the organization that come under the financial reporting and accounting of the organizations and companies.



Ahmad, M. A., 2003. The Value Relevance of Accounting Numbers and The Implications for International Accounting Standards Harmonization: Evidence from Saudi Arabia and Kuwait. ProQuest Dissertions and Theses, p. 24.

Al-Mudhahki, P. L. J. a. J., 2001. The Impact of IAS and BASEL II Regulations on Net Interest Margin: Evidence From Italy. Journal of Financial Management and Analysis, 14(2), pp. 43-45.

Montanari, M. F. a. S., 2010. The IAS/IFRS application on the intangible assets of non-listed companies. Journal of Modern Accounting and Auditing, 6(5), p. 22.

Piatti, D., 2012. THE IMPACT OF IAS AND BASEL II REGULATIONS ON NET INTEREST MARGIN: EVIDENCE FROM ITALY. The International Journal of Business and Finance Research, 4(3), p. 19.


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