The Need for Accounting Standards - 3286 Words

What would financial statements look like if there were no accounting standards?† Accounting standards are a set of principle that govern current accounting practice and are used as a reference to determine the appropriate treatment of complex transactions. Having financial statements in the same format allow them to be compared and in this essay we shall discuss how the accounting standards came about, and why it continues to exist until this very day, as the format of such practice has changed dramatically over the years as they are now used as a reference when problems occur. There were no accounting standards until the 13th century when an Italian man named Luca Pacioli invented double entry bookkeeping; a system that†¦show more content†¦Without accounting standards around the 1900’s, those who provided the information and those whom the information was provided to were focused mainly on what was happening and this strategy of dealing with what was happening encouraged the substantial use of non-financial information which they found was valuable when evaluating the sensibleness of dollar values for entries in income accounts or balance sheets. Fig. 1 The positive accounting theory (Fig. 1), which explains some discrepancies, is based on agency theory and efficient market hypothesis. The latter addresses the issues that arise between the shareholders and the management of the company or the difference in perspective of the management and the shareholders of the company (Dr. Bamberg Dr. Spremann, 1987). Agency theory has been one of the major issues that have affected the transparency in the way the organizational decisions are taken that have huge financial implications for the investors (Bowie Freeman, 1992). Accountants these days are bound by a varied amount of standards depending on the type of business and where it is located. The various standards include; Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS) which adopts most of its standards from the International Accounting Standards (IAS). Most countries initial accounting standards was GAAP, which is what the USShow MoreRe latedCritically Evaluate the Need for Accounting Standards and the Need for a Set of Principles on Which They Are Based1910 Words   |  8 PagesQuestion 1 Critically evaluate the need for accounting standards and the need for a set of principles on which they are based. Accounting Standards Accounting standards contain a set of rules and governing practices for the treatment of all financial transactions. The main objective of accounting standards is to establish recognition, measurement, presentation and disclosure requirements dealing with financial transactions and key events which are important in the financial statements of companiesRead MoreHow The Efforts Of Global Accounting Needs Global Standard Ethics? Essay3565 Words   |  15 PagesEfforts of Global Accounting Needs Global Standard Ethics? If you were traveling on matter to Mexico City for the first tense, you d be wise to research the local fluency, laws and business etiquette. Similarly, if your audience client operates a greater subsidiary in Mexico and your audit report will be relied upon by users of the principal s bursal statements in Mexico, you need a working notice of international professional standards. You should know approximately the accounting, auditing, ethicsRead MoreAcc 541 Accounting Standards Board Paper1116 Words   |  5 PagesAccounting Standards Boards Leslie Brian ACC/541 November 14, 2011 Delphine Agnor Wolsker Accounting Standards Boards The field of accounting is constantly evolving. This is true not only for the theory of accounting itself but also the entities that govern its theory and practice. Presently, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are faced with some of the biggest challenges to date. To understand the significanceRead MorePurpose And Context Of International Financial Reporting1272 Words   |  6 Pagesoffering in the stock exchange market. However, stock exchange need to be regulated to ensure transparency and fairness. Companies try to manipulate the price for the benefit of the business ethically and unethically. Therefore, standard must be set to maintain a fair and orderly market while encourage investors’ confidence (Chandrasekera, 2011). Different stock exchange in different country adopt different set of rules and standards and seek the best fit for the particular exchange. Companies’ financialRead MoreThe Inte rnational Accounting Standards Board1249 Words   |  5 Pageschallenged by disparate accounting standards between jurisdictions, preventing the free flow of capital worldwide. The mission of the International Accounting Standards Board (IASB) is to develop a single set of accounting standards, enabling capital to flow in international markets as easily as information spreads between people. 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However, how demanding it is for the internal operation of the organizations to maintain, not retain the information; try to provideRead MoreAccounting Theory and Research1155 Words   |  5 PagesAccounting Standards Board University of Phoenix Accounting Theory and Research Jun 13, 2009 Accounting Standards Board To address the increasing challenges of legislating those governs our society today, â€Å"countries all over the world have begun to outsource rulemaking to bodies consisting of people familiar with the subject. For that reason, policymakers rely on private entities to establish financial accounting and reporting standards† (Donald Kieso, 2003, Intermediate Accounting). TheRead MoreThe Importance Of Accounting Standards For Business Affairs1049 Words   |  5 Pagesthat’s understandable globally and comparable across the international boundaries. IFRS initially was formed to harmonize accounting across European Union, but the value of harmonization was so overwhelming and attractive around the world that became a benchmark globally. Importance of Accounting Standards In this assignment I want to explain the importance of the Accounting standards. As the world economy is becoming integrated and globalization is becoming a universal phenomenon, more and more businessesRead MoreGeneral Accepted Accounting Principles958 Words   |  4 PagesAccounting Principles i Running head: GENERAL ACCEPTED ACCOUNTING PRINCIPLES General Accepted Accounting Principles Accounting Principles ii Abstract My paper is about the GAAP (General Acceptance of Accounting Principles) which were created by the Accounting Principles Board (APB). The board was created by American Institute of Certified Public Accountants (AICPA) in 1959. APB issued 31 Opinions from 1959 to 1973 and those Opinions created GAAP. I think GAAP is interestingRead MoreIntroduction. Keeping The Day-To-Day Business Accounting1588 Words   |  7 PagesIntroduction Keeping the day-to-day business accounting is not just a necessity but rather, and above all, an obligation. Financial accounting seeks to find answers to recurring questions in a business such as, how much was sold last month, how many people have used the services, and how much to produce to meet the needs of the customers. The financial accounting is a method that helps better organize and manage any business. Accounting is the science that serves to organize all the numeric records