ACCOUNTING STANDARDS

Accounting Standards



Accounting Standards

Introduction

Accounting standards setting came as a practice to fight the evils originating from incorrect financial reporting. Financial frauds based on misrepresentation of financial statements have contributed to huge losses for many companies. Even public companies are victimized by the loopholes in the accounting reporting standards. The preparers of financial statements and the makers of accounting standards have been battling for many years. In an attempt to combat these loopholes, a committee was established by Securities and Exchange commission in the United States. This paper analyzes the various standard setting approaches in a holistic context.

The issues of corporate governance and internal control are of particular relevance when companies work for financial reporting odds (Barth, Landsman & Lang 2008 467-498). The paper throws light on the issues of corporate governance and the regulatory, culture & ethical dimensions to the introduction of international accounting standards.

Approaches to Standard Setting In Accounting

The key approaches pertaining to stanadard setting in accounting reporting includes the creation of the legal frameworks, training and methodological support to financial statement users, and information cooperation between stakeholders of the company's financial information. In particular, an important approach called the British-Americna and Continental model has been greatly adopted in a legislative form (Hope 2002).

British-American Model

British-American model legislation does not regulate in detail the life of individuals and entities, and sets the limits of freedom of action. The main body, engaged in the publication of accounting standards is the Council of Financial Accounting Standards Board (FASB). The main objective of the Council is to develop and improve accounting standards for use in the private sector, auditors and users of financial statements (Alan and Susan, 16-24).

The Board is independent as the independence is ensured by the fact that monitoring of the activities implemented by the Council of Financial Accounting. In addition to the Council formed the Council on Accounting Standards in public institutions; in parallel, the Council is engaged in the practice of accounting regulation the government agency, the Commission on the Securities and Exchange Commission (the representation and protection of interests of investors in accordance with the law on securities).

The set of rules governing financial records, forms accepted accounting standards (GAAP). These methods are based on the priority needs of external users of financial statements which are used by many private companies. Although many private companies there is no statutory audit, etc., they often adhere to these accepted norms (Barry and Eva, 2008, 21-34).

Continental Model

The continental model is the legal regulation of accounting principles and the standardization of accounting procedures. Here, the approaches to standard setting in accounting have the status of state acts (Hope 2002). This approach is largely generated by the action in various countries, codes of laws, administrative set-permissive legal regime (strictly by the letter of the law).

The analysis of both models reveals the basic features of modern systems of management accounting. The purpose of regulatory accounting more accurately and fully formulated an international team of UN experts that is providing affordable and comparable information, including ...