They are the ones responsible for listing and analyzing every figure that comes in and out of the company's pocket. The main tool used by company's to determine their financial condition is the financial statement. It aims to supply important information concerning a company's financial position. Accounting practitioners have recognized the need to formulate accounting standards to be followed by every organization. They realized that it is of utmost importance not only to them but to all individuals who are engaged in business Part I Purpose and Significance of Financial Accounting Standards There are three considerations that Accounting Practitioners refer to when asked about the purpose of Accounting Standards. First is that it aids in sustaining the effectiveness of various accounting policies by getting rid of the discrepancies in financial statements. Second, it provides assistance to efficiently present credible and comparable data found in the financial statement of companies. Lastly it functions as an accounting alternative that lessens the notion of subjectivity in financial statements (Chandra, 2011). Accounting practitioners follow a set of guidelines while in the process of gathering financial information. They refer to it as Generally Accepted Accounting Principles (GAAP). In the United States, Generally Accepted Accounting Principles (US GAAP) prepared by the Financial Accounting Standards Board (FASB) serve as the primary basis for entries that are required to be present in financial statements of private companies (Kuppapally, 2008). So that organizations can sustain and expand their operation, internationally accepted accounting standards were formulated, also known as the International Financial Reporting Standards (IFRS). The existence of IFRS in the global market made possible the reduction of incompatibilities in capital flows, leading to an increasing rate of investment in the global market. The International Accounting Standards Board (IASB) is the body in charge of regulating the standards that are listed under IFRS (Chandra, 2011). Last October 29, 2002, FASB and IASB entered into a covenant known as "The Norwalk Agreement," which has recognized their duty to establish accounting standards that are adaptable to both domestic and international financial reporting. The two standard governing bodies of financial accounting made a deal to finally reconcile their differences in order to attain the objective of the agreement, which is to establish internationally accepted standard suited to the needs of the different companies in nations around the world. The signed memorandum of understanding focused on the convergence of the two. The gradual process of eliminating the differences with the help of joint projects will eventually result to an enhanced comparability of financial statements not only in the US but also in other nations (Financial Accounting Standards Board, 2002). Independent auditors strictly follow the Generally Accepted Auditing Standards (GAAS). These auditing standards supply the benchmark on the quality of audit that auditors must comply with. The American Institute of Certified Public Accountants (AICPA) made possible the implementation of GAAS in auditing nonpublic companies. Auditors are obliged to know all the statements on auditing standards (SAS) because the basis of making the final decision in auditing financial reports is their judgment on what standard
The Importance of Accounting Standards to Financial Accounting First Last Name Name of Institution The Importance of Accounting Standards to Financial Accounting Introduction Successful business operation depends on the effective implementation of company policies…
As a consequence to the failure of the US GAAP, various nations all over the world grew more attracted towards a financial reporting system which is more principle-based. FRC was in support to the system because principle-based rules are the regulator within the capital markets.
Accounting Standards 1 Politics have a lot of influences when setting the acceptable accounting standards. People who have their economic personal interests have used politics to set accounting standards, which are beneficial to them. For example, the political difference between the Republic of China and the United States of America has seen different accounting standards in the two countries.
As an accountant if I had a chance of working for one of these three boards I would choose the Financial Accounting Standards Board (FASB). My entire accounting training has been based on GAAP and the regulations and principles that were developed by the FASB during the last four decades.
Any successful business must be financially viable, attract maximum profits, and enjoy a competitive advantage. However, in the ever-increasing competitive world, there is need for standards that govern the mode of doing business and comparing the business operations between the competing entities.
The achievements are also elaborated along with the framework which has made them successful. The report elaborates the concept of fair value accounting system and the arguments for or against the decision of inclusion of the fair value concept in the financial reporting.
The IASC was set up in 1973 by the professional accounting bodies of nine countries with two principal objectives including: 1) the formulation and publication of accounting standards to be observed in financial statements and to promote their worldwide acceptance and; 2) To work generally for the improvement and harmonization of regulations, accounting standards, and procedures relating to the presentation of financial statements.
The international accounting community has been struggling to achieve the goal of harmonizing the accounting standards around the world and the period of last five years particularly depicts a picture of their continued efforts in convincing the world towards the unification of accounting standards and principles.
The Accounting standards board (ASB), has already declared its intention of replacing UK GAAP with IAS's and making them compulsory for all UK companies no matter what size, thus the benefits and costs of these standards are of high importance to the UK.
The company is then required by many of the financial statement users to present an external auditor's report to add some credibility to the amounts stated in the financial statements. The following paragraphs explains the importance of external auditors as well as internal auditors in the reducing or even eliminating the errors and frauds that stain the financial statements.
However most of the European countries had already embarked on their convergence towards the international standards for financial reporting. The United States' standards setting body, FASB is consistently working towards the convergence of US GAAP to the international accounting standards in response to international pressures.
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