The information revealed by the published financial statements is of considerable importance to shareholders, creditors, and other interested parties. Hence, it is the responsibility of the accounting profession to ensure that the required information is properly presented. Therefore it is necessary that certain standards should be followed for drawing up the financial statements so that there is the minimum possible ambiguity and uncertainty about the information contained in them. The International Accounting Standards Committee (IASC) has undertaken this task of drawing up the standards

(i) The Growth in International Investment: Investors in international capital markets make decision based on published accounting which are based on accounting policies and which again vary from country to country The International Accounting Statements will help investors to make more efficient decisions.

(ii) The Increasing Prominence of Multinational Enterprises: Such enterprises render accounts for the countries in which their shareholders reside and in local country in which they operate. Accounting standards will help to avoid confusion

(iii) The Growth in the Number of Accounting Standard Setting Bodies: It is hoped that the IASC can harmonies these separate rule making efforts. The objective of the IASC is to formulate and publish in the public interest standards to be observed in the presentation of audited financial statements and to promote their world-wide acceptance and observance.

Following is the importance of accounting standards:

• Standards reduce or eliminate all together confusing variations in the accounting treatment used to prepare financial statements.
• With different companies following same standards, comparison of their financial policies and financial results becomes easier.
• Accounting standards take care of valuing inventories, contingencies, construction contracts, fixed costs, etc. They cover all aspects of financial activities of company.
• The standards help the investors for taking decision on investment.
• Setting standards is useful to both the company & and the investor.