Academic journal article UTMS Journal of Economics

International Standards for Financial Reporting: Harmonization in Macedonia

Academic journal article UTMS Journal of Economics

International Standards for Financial Reporting: Harmonization in Macedonia

Article excerpt


The objective of the financial statements is to provide truthful information about the financial condition, results, cash flows and changes in the financial position of the entity that is useful for a number of users, internal and external, when making economic decisions on the allocation of scarce resources. Also, the financial statements present the results of the management, or the responsibility of the management to allocate resources entrusted to them. The information presented in the financial statements is used by current and potential investors, lenders and other stakeholders, both internal and external users of financial statements in making investment, credit, management and other decisions. Users can perform assessment of the value of assets, the deadlines for settlement of liabilities and receivables, as well as estimate the uncertainty in the realization of future cash inflows and outflows, liquidity and solvency, assessment of the net cash inflows that would be used to return the investment to the investors in the form of profits and to the creditors.

Standardized financial reporting is not a goal to itself; it is a mean of communication, "unified language" of the global business environment. The tendency for the harmonization of financial reporting is an integral part of the process of business globalization (Carmona and Trombletta 2008). The standardization and harmonization of financial reporting is conducted through the convergence of international accounting standards and international standards for financial reporting, which would reduce the differences in the preparation of financial statements and information presented in the reports in order to facilitate and improve the quality of mutual communication of entities in different national economies (Hung and Subramanyam 2007). The existing differences in national accounting standards make it difficult to compare the information on the status and success of domestic companies by companies from other national economies (Weygandt, Kimmel, and Kieso 2011).

The need for quality and standardized financial reporting in most developed countries and markets has been elevated in the recent years with the increased level of reference on providing useful information for both sides: domestic and foreign creditors on one side and capital investors on the other side. The internationalization of accounting standards is an important requirement for the harmonization of financial reporting. The expansion of the capital markets and international investment entails the need for setting uniform global accounting standards (Kozuharov 2010).


Financial reporting clearly and unambiguously provides numerical and quantitative expression of the phenomena of economic activities of the entity. The standardized financial reporting presents the disclosure of accounting information with no substantial differences in recording the accounting effects derived from the company's activities in the reporting data (Ikpefan and Akande 2012). The effects of the company's activities are numerical characteristics of assets, liabilities and equity that are classified as financing activities, investing activities and operating activities of the entity.

The purpose of the financial notifications in accordance with the international standards is a benefit for all internal and external stakeholders using the numerical and quantitative indicators of the financial statements for the operations of the entity (Rudy and Madu 2009). In order to accelerate the microeconomic and macroeconomic developments, there is a need of a continuous flow of reliable and relevant information on which investors will be able to make economically viable strategic decisions about allocation of scarce resources (Weygandt, Kimmel, and Kieso 2012).

The information disclosed in the financial statements, is used for the business decision making process within the entity, as well as for planning, control and regulation of the overall company's actions at national and international level. …

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