FINANCIAL ACCOUNTING

Financial Accounting in Australia



Financial Accounting

Accounting Standards

As the world is moving towards globalization where the concept of free market has its own importance leads to the setting of Accounting Standards, as to provide standardize form of financial information of any economy or company. The purpose is to turn the whole world into one market, which generated the need for accounting standards setting. Though there are various accounting standards being practiced all over the world especially one is related to European practices and other is to American practices, however there are fourteen generally accepted accounting principles (GAAP) that is followed everywhere.

These 14 standards are mandatory to understand as this would ultimately help in understanding the process involve in setting of these standards. However, free market remains the major factor of setting accounting standards because in a free market investors from all over the world invest their capital and in turn they required to get profit, and in order to judge which area is best for investment a financial or an accounting report would be proven helpful, thus this increased the need of the setting internationally accepted accounting standards (Godfrey, and Langfield-Smith, 2004, pp. 04-08).

Political and business interference have been observed in setting accounting standards. Although many countries and economies denote setting of Accounting Standards in favor of US and European countries are they argue that they have created the standards as this could benefit them, the most prominent interferences in this regards is from Columbia as a study that I have presumed a best example of interference in setting accounting standards argue that globalizations and setting accounting standard is nothing but a strategy of domination, not reverse without braking. Gravity is a social and economic is an inevitable step towards the full adoption of Accounting Standardization and thought only of Globalization.

It is uncertain hindering the way we must follow, as the conditions imposed by those in power, authority, technology, weighs more and more about who we submit to no certainty mechanisms that bring benefits to our accounting procedures and practices. The purpose of Globalization and Standardization of an entire accounting practice are only the interests pursued by the Financial Capital as order taking and market relations of power (Godfrey, and Langfield-Smith, 2004, pp. 04-08).

Baker (2005) considers the accounting information as an economic asset through which seeks to improve resource allocation in the economy, as regards the distribution of wealth among individuals and the productive capital formation. But it can be impossible to achieve the desired balance between supply and demand to let the market operate freely; it would be a deficit or excess of information, which would result in an inefficient allocation of economic resources. In this market information providers (companies) and demanding it (the investors or creditors) and to the inefficiencies (or failure) of operating accounting regulation is advisable to ensure the provision of information.

Solomons (2008) states that the origins of these market failures or inefficiencies in the provision of information would externalities and asymmetries in the distribution ...