The interaction of accounting standards refers to the way in which different accounting standards interrelate and impact each other. This interaction is critical for a few reasons:

1. Holistic Financial Reporting: Financial statements are the product of various accounting standards applied together. Understanding how these standards interact is vital for creating a complete, accurate, and fair presentation of a company's financial position, performance, and cash flows.
2. Avoiding Misinterpretation: Some accounting standards may impact the application of others. For example, the standard on revenue recognition might influence the standard on leases or contracts. Understanding these interactions can help prevent misinterpretation or misapplication of standards.
3. Complex Transactions: Complex transactions might involve several aspects covered by different standards. For example, a business combination might involve standards related to intangible assets, goodwill, financial instruments, foreign exchange, etc. Understanding how these standards interact is crucial for accurately accounting for such transactions.
4. Consistency and Comparability: Understanding the interaction of standards helps ensure consistency in the application of accounting principles within a company and comparability of financial statements across companies.
5. Compliance: Companies are required to comply with all applicable accounting standards. Understanding how these standards interact helps ensure that no standard is overlooked or misapplied, thus helping ensure compliance.
6. Effective Decision Making: For investors, analysts, and other users of financial statements, understanding how different standards interact provides a more in-depth understanding of a company's financial reports, which aids in making informed decisions.

In essence, understanding the interaction of accounting standards allows for a more nuanced and accurate application of these standards, leading to better financial reporting and decision-making.