December 23, 2020

need for accounting standards

Key areas of difference between FRS 102 and FRSSE include investment properties and financial instruments. If we merely look at accountings’ basic purpose of accounting standards, it is to facilitate the provision of financial information as well as, to give a clear picture to corporations’ investors of their cash inflow, assets, equity and liability , revenues and expenditures etc. Practically, this statement, inter alia, accepts IASC as the sole body responsible for issuing pronouncements on international accounting standards. 500 crores or less will adopt it in April 2014. Free resources to assist you with your university studies! International Accounting Standards were replaced in 2001 by the International Financial Reporting Standards (IFRS) Currently, the United States, Japan, and … But this variety of kind of business, a… Study for free with our range of university lectures! Bankers express how the FASB would limit the banks’ ability to manage risks as well as only certain financial assets and liabilities would be marked in the balance sheet. IFRS 5: Non-Current Assets held for Sale and Discontinued Operations, IFRS 6: Exploration for and Evaluation of Mineral Resources, IFRS 7: Financial Instruments; Disclosures. Contingencies and Events Occurring After Balance Sheet Date, 5. Do you have a 2:1 degree or higher? Disclaimer 9. 1. 3. Over time it has been proven that International Accounting Standards needs to be implemented particularly after, the famous corporate scandals, involving Enron and WorldCom etc. It includes companies having a Net worth of Rs. (a) Framework for the preparation and presentation of Financial Statement 1989, (b) Standing Interpretation Committee (SIC) issued before 2001, (c) International Accounting Standards (IAS) issued before 1001, (d) Interpretations Originate from the International Financial Reporting Interpolations Committee (IFRIC) — issued after 2001. In view of the fact that several conferences and debates have been held as to whether the international accounting standards should be implemented world wide. (M.V. Copyright 10. Japan is expected to adopt by 2015 or 2016 although it permits certain domestic companies to introduce IFRSs after 31st March 2010. Financial Accounting Standards. IAS 1: Presentation of Financial Statements, IAS 2: Valuation and Presentation of Inventories, IAS 8: Net Profit or Loss for the Period― Fundamental Errors and Changes in Accounting Policies, IAS 10: Events occurring after Balance Sheet Date, IAS 11: Accounting for Construction Contracts, IAS 14: Reporting Financial Information by Segments, IAS 15: Information reflecting the effects of Changing Prices, IAS 16: Accounting for Property, Plant and Equipment, IAS 19: Accounting for Retirement Benefits of Employees in the Financial Statements of Employers, IAS 20: Accounting for Government Grants and Disclosure of Government Assistance, IAS 21: Accounting for Effects of Changes in Foreign Exchange Rates, IAS 22: Accounting for Business Combinations, IAS 23: Capitalizations of Borrowing Costs, IAS 24: Disclosure of Related Party Transactions, IAS 26: Accounting and Reporting by Retirement Benefits Plans, IAS 27: Consolidated Financial Statements and Accounting for Investments, IAS 28: Accounting for Investments in Associates, IAS 29: Financial Reporting by Hyperinflationary Economics, IAS 30: Disclosure of Financial Statement and Banks and Similar Financial Institutions, IAS 31: Financial Reporting of Interests in Joint Ventures, IAS 32: Financial Instruments—Disclosure and Presentations, IAS 34: Accounting for Interim Financials Reporting, IAS 37: Provisions, Contingent Liabilities and Contingent Assets, IAS 39: Financial Investments—Recognition and Measurement. The question, therefore, arises as to how to ensure that accounting standards are meeting global needs? Their objective is to provide financial information to investors, lenders, creditors, contributors, and others that is useful in making decisions about providing resources to the entity. According to a number of analysts they believe in order to regain confidence following the scandals, where accounting fraud was discovered. Registered office: Venture House, Cross Street, Arnold, Nottingham, Nottinghamshire, NG5 7PJ. According to some authorities like Yorston, Smyth and Brown- ‘a standard is a performance target or goal or an agreed criterion of what is proper practice in a particular situation.’ There are some other authorities who prefer to use the term “Accounting Principles” in place of “Accounting Standards”. Need of Accounting Standards:. worldwide acceptance and operation, the statement of). Accounting Standards could differ, even within the same country if the International Standards are not enforced. Need of Accounting Standards 3. Moreover, The International Federation of Accountants (IFAC)—which was held at the IX International Congress of Accountants in October 1977 had been set up in order to harmonies accounting, auditing and reporting practices in an area which will see growing interdependence of the commercial and industrial systems of the world. Reference this, In the course of this essay, the topic that will be discussed is the importance of having international accounting standards. Many countries require IFRS reporting for all domestic listed companies. The following year the international fraternity of accounts took stock of the situation and constituted the International Accounting Standard (IASB) to evolve and prescribe norms for treatment of several items in the preparation and presentation of financial statements. (b) The firms are not allowed to maintain and present their accounts according to their own will or choice or cannot prepare report of financial statements for various interested groups. This is not an example of the work produced by our Essay Writing Service. (ii) To work for the improvement and harmonisation of regulation of Accounting Standards and procedures relating to the presentation of financial statements. The IFRS even is not free from snags. The Accounting Standards will, however, be issued under the guidance of the Council. Kali Prasad, 2006), In the summer of May 25, 2000, the US Securities and Exchange Commission suggested the acceptance of IAS for use in cross border. The growing volume of cross-border capital flows makes having international standards, that are high in quality and testable across the board, a priority. During formulation of accounting standards, the ASB considered the applicable laws, usages, customs and the business environment existing in our country. In regard to the objective (i) stated above, i.e. Another name of guidelines is Accounting Policies. The same is possible only when there is some fixed standard for setting practice. It resulted in widespread of fears of losing public confidence and the need to strengthen internal controls. You can view samples of our professional work here. Content Standards. Some firms operate on the cash method of accounting which can often be simple and straight forward. 1,000 crores, which will move to IFRS standing from April 2013. For this purpose ASB took the valued views and guidelines of various industrial houses, the Government, and other interested parties. General acceptance of IFRS will, no doubt help the investors as well as the other users of financial statements. Practically, Accounting standards have been presented in order to maintain fairness, consistency and transparency in accounting practice which will satisfy the users of accounting. Thus, the Standards are considered as a guide for maintaining and preparing accounts. Accounting standards apply to … For this, the Government of India is firm on the transition of Indian Companies from GAAP to IFRS. Disclaimer: This work has been submitted by a university student. The same is possible only when both of them follow identical method of valuing closing stock. Accounting Standards are the one that helps in bringing the uniformity in whole accounting. Accounting Standards mainly deal with four major issues of accounting, namely. ASB will explain the basic concepts on which accounting principles should be oriented and will also explain the accounting principles on which the practice and procedures should conform while performing its functions. According to a number of analysts they believe in order to regain confidence following the scandals, where accounting fraud was discovered. (b) IFRS helps to present its financial statement on the identical basis like its foreign competitors, i.e., comparisons become easy. whether to use rules or principles based accounting standards Stakeholders in accounting include and are not limited to shareholders/investors in the company, regulators, lenders, customers and the accounting profession, just to mention a few. Objectives and Features of Accounting Standards. In the course of this essay, the topic that will be discussed is the importance of having international accounting standards. (d) It helps the foreign investors who are using IFRS. Content Guidelines 2. Accounting Needless to mention that the Institute of Chartered Accountants of India and the Institute of Cost and Works Accountants of India are Members of the International Accounting Standards Committee. Plagiarism Prevention 4. As such, it becomes necessary to develop some GAAP (Generally Accepted Accounting Principles) while preparing the financial statements by which the language of the business can be communicated to the users. (Napier, C, 2009). These standards are global standards in order to prepare the financial statement of public company. India has adopted IFRS in April 2011. These standards may be established by the Council of the Institute in India. Content Filtrations 6. Many countries have their respective plans to introduce IFRSs as early as possible. Some standards have been withdrawn and some were revised. Registered Data Controller No: Z1821391. Money is a big problem for many people all over the world. Accounting for Investments in Associates in Consolidated Financial Statement, 27. 1,000 crores, will adopt IFRS Standards in April 2011. The International Accounting Standard Committee (IASC) was established in 1973 to create accounting standards. According to him: “When we sit round the IASC Board table and in the steering committee which creates the standard, we do so in our capacity as experts in Accounting and certainly not as auditors. We're here to answer any questions you have about our services. Some International Accounting Standards (IAS) which were issued between 1973 and 2001 by he IASC (International Accounting Standards Committee) form a part of International Financial Reporting Standards (IFRS). Thus the purpose of setting Accounting Standards is nothing but to find a uniformity in accounting practice while formulating financial reports and make consistency and proper comparison of data which are contained in financial statements for the users of accounting information. The Institute of Chartered Accountants from 10 nations i.e., USA, Canada, UK and Ireland, Australia, France, Germany, Japan, Mexico and Netherlands) signed the constitution for its formation. (Vass, P.1990) On the other hand if the accounting system were standardized that would bring authority simultaneously and everything would be a lot more transparent as well as consistent regardless if it was private or public sector. The European Securities Committee (ESC) needs ‘EU adopted IFRSs equivalence from those companies who are following, Third World Country. No plagiarism, guaranteed! These Accounting Standards were implemented to eliminate the non-comparability of financial statements and the reliability to the financial statements. (Vass, P.1990). At the end of this section, students should be able to meet the following objectives: Describe the purpose of accounting standards such as U.S. Generally Accepted Accounting Principles (U.S. GAAP) and International Financial Reporting Standards (IFRS) and the benefits that these rules provide. Presently the EC (European Commission) has notified that Indian Accounting Standards must be treated as par with EU adopted IFRSs for the time being which are applicable for those companies that are incorporated in US, Mexico, Canada, Japan, South Korea, and China. Accounting standards specify how transactions and other events are to be recognized, measured, presented and disclosed in financial statements. Accounting standards are needed so that financial statements will fairly and consistently describe financial performance. The Institute of Chartered Accountants of India (ICAI) , to harmonize the diverse accounting policies and practices, constituted at Accounting Standard Board (ASB) on 21st April 1977. It is critical to have a standardized accounting; firstly the strategic decision making would be a lot more accurate and secondly increase in confidence. Listed companies having a Net worth of Rs. A religious base accounting system is not commonly practiced today; it is because in time accounting was allowed to grow and evolve with the help of accountants who have managed to create various kinds of accounting methods that are used in different continents round the globe. It helps in dissemination of timely and useful financial information to all Stakeholders and users. Accounting Standards: Accounting is the art of entering minutess in the best mode possible. The Accounting Standards will, however, be issued under the guidance of the Council. Thus, the principles which are formulated or developed in this regard and which are approved by the specialised bodies are known as “Accounting Standards.” Practically, it will help us to assess the progress or otherwise of a firm after comparing the actual performances with the standard. In the United States, GAAP consists of rules and standards established by the Financial Accounting Standards Board (FASB). It will improve and increase the quality of information and will also reduce the cost of comparing alternative investments. Provisions, Contingent Liabilities and Contingent Assets, 30. The Objectives of IAS is to develop accounting standards which are to be observed in the presentation of audited financial statements and to promote their worldwide acceptance. Larger … Some of them are: (a) There are certain use issuers who will resist IFRS as they do not have any market incentive for the preparation of IFRS financial statements. The public relies heavily on this information to be consistent and accurate for … Company Registration No: 4964706. Question 1 Critically evaluate the need for accounting standards and the need for a set of principles on which they are based. Naturally, those companies should have to fill financial reports as per the ‘EU adopted IFRSs’ for the purpose of using and listing securities in the absence of equivalence. 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