Interaction of accounting standards refers to the way in which different accounting standards influence each other in their application and interpretation. It is a critical concept in financial reporting for several reasons:

1. Complex Transactions: Transactions often involve elements that are governed by different accounting standards. For example, a business combination might have implications for standards on revenue recognition (IFRS 15), leases (IFRS 16), and financial instruments (IFRS 9), among others. Understanding how these standards interact is essential for accurately accounting for complex transactions.
2. Consistency in Financial Reporting: Financial statements are a product of multiple accounting standards working in conjunction. Understanding how these standards interact ensures that financial reporting is consistent and accurate.
3. Compliance with Regulatory Requirements: Misunderstanding or misapplying the interactions between standards can lead to non-compliance with regulatory requirements, potentially resulting in fines, penalties, or reputational damage.
4. Investment Decisions: Investors and analysts need to understand how accounting standards interact to fully comprehend a company's financial statements. This understanding is critical for making informed investment decisions.
5. Future Predictions and Business Planning: Understanding how changes in one accounting standard might affect others can help a company predict future reporting implications and plan accordingly.
6. Risk Management: Understanding how different standards interact can help a company identify and manage financial reporting risks, especially in industries with complex transactions.

In conclusion, understanding the interaction of accounting standards is crucial for ensuring accurate, compliant, and insightful financial reporting, which in turn supports sound business decision-making.