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Principles of accounting 1 - Essay Example

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Principles of accounting 1

Recently, the standards and principles of GAAP have been transited to IFRS with the aim of having a single set of accounting principles with universal applicability. It provides the rules along with regulations in compliance with which, financial statements and reports should be prepared. The accounting standards and principles that are included in the IFRS are universally identified, which implies that every entity, on a global context, must evaluate and represent their accounting information in accordance with the determined rules and regulations of IFRS (Needles, Powers and Crosson 24-25). The essay thus intends to discuss the advantages that can be acquired from a single set of accounting principle. Moreover, the discussion henceforth reveals the disadvantages attached with multiple accounting principles on a global context. The discussion also emphasizes on detailing the accounting standards adopted by IFRS for universal applicability, further detailing the accounting principles that business units operating in United Arab Emirates (UAE) adopts. ADVANTAGES OF IFRS 3 The accounting principles and standards adopted and implemented under the GAAP form the common set of standards and principles developed for recording financial transactions and information in an appropriate manner by publicly listed companies worldwide. Additionally, ‘International Financial Reporting Standards’ (IFRS) have formulated accounting standards and principles, which are adopted as common accounting practices in all the countries. It is identified in this regard that GAAP and IFRS are two different sets in relation to accounting principles that are used in different countries. Both the GAAP and IFRS work with a common objective of guiding companies through a set of common accounting principles on a global context. The accounting principles are principally based on the notion that financial reports with common objectives act as the tool to ensure that financial information are evaluated and recorded in a transparent manner. Moreover, the management team and employees of a company entrusted with the responsibility of analyzing and preparing financial reports is likely to develop accounting reports in a simple and consistent manner. The recording of financial information under a single set of accounting principles can further facilitate in providing better information to worldwide investors along with creditors so that the stakeholders are able to acquire reliable and appropriate information (Wong, “The Trend of IFRS Conversion: What you need to know about the transition from GAAP to IFRS”). It is worth mentioning in this regard that the principles of GAAP have certain rules along with regulations that lack completeness in relation to several circumstances. In this regard, a single set of accounting principles is developed by the IASB with the objective of developing a transparent procedure of recording and communicating accounting information in order to minimize accounting frauds and misrepresentation of financial statement assisting users, such as the employees of companies, to obtain adequate in relation to the employment benefits they are entitled with. Furthermore, a single set of accounting standards and practices on a global context will facilitate business organizations of different countries to compare their financial performances in an impartial manner providing significant information about the performances of a company ...Show more

Summary

Principles of Accounting 1 INTRODUCTION The commonly followed accounting principles and statements with detailed guidelines are stated in the ‘Generally Accepted Accounting Principles’ (GAAP) developed by ‘Financial Accounting Standards Board’ (FASB)…
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