Consistent Application of IAS on European on Companies Essay

Consistent Application of IAS on European on Companies - Essay Example The Europe Union has been aiming to have an efficient capital market (Toporowski, 2000; Davis, 1997; Dermine and Hillion, 1999) for its Member States through an efficient and effective financial information system in a transparent European capital market even prior to the Enron scandal in 2002.   The subsequent US scandals in securities market may have triggered the early adoption of IAS in 2002 to require its application to all listed companies in Europe as of 2005. For EU, the issue of efficient capital market is of course broader than the issue of these international standards. Attainment of EU’s purpose therefore under this field is part of its desire for economic advantages (Carroll, Thomas, 1983; Slavin, 1996; Samuelson and Nordhaus, 1992)   of its   member states in the global economy as it hastens its economic integration (Graetz, et. al, 2006; Halkos and Salamouris, 2003, European Economic Integration, 1994). The Enron scandal cannot be separated from the failur e of the US generally accepted accounting principles (GAAP) on financial reporting (Choi and Fisch, 2003) that became the basis for the European Union (EU) members to be unable to find their trust on said accounting rules and conventions.   Persuading the US to change its GAAP with the IAS due to ineffectiveness of the former in the Enron scandal is part of the process. With European Commission having urged the SEC to adopt IAS in February 2002, an overwhelming adoption of the IAS by European Parliament in March 13, 2002 was evident by a vote of 492 for, 5 against and 29 abstentions. The European Parliament endorsed the Commission’s proposal for all EU listed companies to follow standards issued by the International Accounting Standards Board in their consolidated financial statements not latter than 2005.   Non-listed companies on the other hand were permitted to decide whether to adopt IAS. Member States were also given the option to exempt some companies temporarily fr om IAS requirement under some cases until 2007. The option is only available in the case listed companies in the EU and in on a non-EU exchange and are following another set of internationally accepted standards and in the case of   companies that have only publicly traded debt securities (Deloitte Touche Tohmatsu, 2008e).