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The need for accounting standards
The need for accounting standards
Effects of changes in accounting standards
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Accounting Regulatory Bodies Paper Introduction The success of a company is very dependent upon its financial accounting. In accounting there are numerous Regulatory bodies that govern the accounting world. These companies are extremely important to a company because they set the standards when it comes to the language and decision making of a company. These regulatory bodies can be structured as agencies, associations, commissions, and boards. Without companies like the Security and Exchange Commission (SEC), The Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), Internal Accounting Standards Board (IASB), Internal Revenue Service (IRS), and other regulatory bodies a company could not make well informed decisions. In this paper the author will look at only four of them. Security and Exchange Commission (SEC) The first one of the organizations that is responsible for assisting and overseeing companies is the Security and Exchange Commission (SEC). “The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation” (SEC 2008, ¶ 1). Basically it is the SEC’s job to interpret the laws that congress passes and assist companies in implementing these laws. While Congress makes modifications to laws it is this companies job to also make all companies aware of these changes and help them to make a smooth transition into using the newly amended law. The Financial Accounting Standards Boards (FASB) The second organization was designed by the SEC in 1973. The FASB was designed with the purpose of creating financial accounting and reporting standards for the public. “The mission of the FASB is to establish and improve standards of financial accounting and reporting for the guidance and education of the public, including issuers, auditors, and users of financial information” (FASB n.d. ¶ 3). The FASB is designed much like the FASB in which they are to protect the public from fraud and misleading information from the company. Internal Accounting Standards Board (IASB) The third organization that helps to regulate the accounting standards is the IASB. “Our mission is to develop, in the public interest, a single set of high quality, understandable and international financial reporting standards (IFRSs) for general purpose financial statements”(IASB 2008,¶ 1). The IASB consists of a board that is made up from nine different countries with the sole purpose of expanding accounting standards. Their main hope and goal is to one day that there will be only one set of accounting standards that will be used throughout the world.
To help accounting professionals easily navigate through 50-plus years of unorganized US generally accepted accounting principles (GAAP) and standards the Trustees of the Financial Accounting Foundation approved the Financial Accounting Standards Board (FASB) Accounting Standards Codification (Codification.) By codifying authoritative US GAAP, FASB will provide users with real-time and accurate information in one location. Concurrently, FASB developed the FASB Codification Research System; a web-based system allowing registered users to electronically research accounting issues. Since 2009, the codification became the single source of nongovernmental authoritative GAAP.
In accounting, private companies are treated differently than governmental and non-profit companies. However governmental and non-profit companies use different reporting requirements from the private sector. The requirements for governmental companies use the Government Accounting Standards Board (GASB), whereas profit and non-profit companies use the Financial Accounting Standards Board. This paper will explain the purpose, discus the similarities, and differences between the GASB and FASB.
IASB revenue recognition benchmarks entering the merging venture comprised of two gauges, IAS 18 and IAS 11. IAS 18 worries about revenues including offer of products, administrations, intrigue, eminences and profits. IAS 11 centers around development contracts. Likewise with all IASB gauges, these standard give standards-based direction without particular direction at the exchange level. The guidelines of U.S. GAAP, gave by FASB, then again comprise of an arrangement of more than one hundred revenue related direction of particular principles on an industry and exchange level; in any case, a great part of the general direction is given by Statement of Financial Accounting Concepts No. 5, a non-legitimate wellspring of U.S. GAAP. The IASB and FASB are ready to embrace a joint standard on revenue recognition. This new world standard would adopt an advantage obligation strategy, for example, that of pre-meeting IFRS, while containing more particular direction than IFRS clients are acquainted with seeing, taking a signal from the GAAP guidelines of the United
What is IFRS, and what is its significance in the world market? In 2001 the International Accounting Standards Board, or IASB, was created to develop a set of standards by which global financial statuses could be reported. According to financialstabilityboard.org, this set of standards, known as the International Financial Reporting Standards, or IFRS, falls under the jurisdiction of the IFRS Foundation, which is a non-profit, private and independently run entity that exists for the public interest, is based on four principle objectives. The first is to develop a single set of international financial reporting standards (IFRS). This set would be high in quality, readily understandable, easily enforceable, and acceptable world-wide. The second objective is to encourage the use of this set of standards in the international business world. Thirdly, the ISAB would like to monitor the needs of different sizes and types of businesses in different settings. The fourth objective is to promote the adoption of the IFRS by converging national accounting standards wit...
Sarbanes-Oxley consisted of 11 different titles or sections. Title I is Public Company Accounting Oversight Board. It created a five member panel known as the Public Company Accounting Oversight Board, overseen and appointed by the Securities and Exchange Commission (Sarbanes-Oxley). The Board is to consist of two CPAs and three people that are not CPAs, but the chairman must be a CPA. The Board is to provide oversight of auditing of public companies while establishing auditing, quality control, independence, ethical standards (Arens 32-33). Public accounting firms that work on audits must register with the Board and pay a fee. Title I also included new auditing rules. Auditors must now retain paper work for seven years, have a second partner review and approval of audit reports, evaluate whether internal controls accurately show transactions as well as sales of assets, and describe any weaknesses or noncompliant internal controls. Public accounting firms that issue auditing reports for more than 100 companies are to be inspected every year. Accounting firms that issue audit reports for less than 100 companies must be inspected very three years. The Board can discipline or sanction accounting firms for what it deems to be negligent conduct (Conference of State Bankers Online).
Generally accepted accounting principles (GAAP) were first established in the 1930s in response to the historical stock market crash in 1929. Nowadays GAAP is influenced by several organizations including the Financial Accounting Standards Advisory Council (FASAC), Securities and Exchange Commission (SEC), American Institute of Certified Public Accountants (AICPA) and the Internal Revenue Service (IRS). Publicly trade companies are required to follow GAAP in the United States. Many other countries have their own set of accounting principles. In today’s global business climate, many businesses need to grow in order to survive. A small business may choose to merge with a bigger another company, and a large company may want to acquire a small company in order to expand in certain condition. More and more international mergers and acquisitions are happening nowadays. But how would they adapt to the ever-changing accounting standards in different countries? There are complications of consolidation of the financial statements when companies make merger/acquisition deal. To be able to adapt to the new business environment, GAAP is also making changes. International Financial Reporting Standards (IFRS) were first developed by the International Accounting Standard Board in 1973. IFRS gained its popularity quickly. Nowadays, over 100 countries recognize IFRS. As the biggest economy in the world, United States (United Nations 2012); however, did not plan to implement IFRSs until 2011. In this paper, we will discuss the possibilities of future of convergence between U.S GAAP and IFRS.
Private and public accounting has long been discussed and disputed in regards to financial reporting. Since the Financial Accounting Standards Board (FASB) was created in 1973, accountants have called for different accounting regulations for private and public accounting sectors, as private companies do not have the resources to meet the complex requirements of public companies. Private companies currently are not required by law to issue annual or quarterly financial statements (James, 2012). Private companies do, however, have the option to apply the U.S. Generally Accepted Accounting Principles (GAAP), cash basis, or accrual accounting to their financial statements (James, 2012).
International convergence of accounting standards is not a new idea. The concept of convergence was brought up towards the end of 1950s in response to the economic integration which took place after WW2. The International Accounting Standards Committee was formed in 1973 and was the first international standards-setting organisation. Since then, the use of international standards has progressed. As of 2013, the European Union and more than 100 other countries use the international financial reporting standards (IFRSs) issued by the IASB. Since 2002 the FASB and the IASB have been working together to improve and converge U.S. generally accepted accounting principles (GAAP) and IFRS. Also in 2013, Japan and China were also working to converge
General accepted accounting principles (GAAP) are considered to be the framework guidelines for financial accounting and jurisdiction of all accounting standards. The (GAAP) includes standards, conventions and the rules that the organization accountant follows when recording and summarizing all the transactions when preparing the financial statements. Third parties that are involved with the reports rely on the information to be free from bias and inconsistency without debate. All business states that, “generally accepted accounting principles are guidelines precisely, are a group objectives and conventions that have been established over time to set how financial statements are prepared and presented (Corporate Government 2010). There is a precedence that takes place when dealing with the finances of different organization. The organizations that deal with any type of financial data must comply with GAAP standards so that outside creditors can view their financial statements with little or no difficulty. For example Financial Accounting Standards (FASB) is private not-for-profit organization that oversees the majority of the different organizations within the United States including the healthcare industry.
The FASB would ensure there are updates and IFRS principles are productive in the U.S. Most likely they would make sure there is no duplication in any of the new accounting principles that are adopted and receive expertise from the IASB to ensure the U.S. companies are reporting there financial information correctly. Additionally, the FASB and IASB would probably coordinate to ensure classification and accounting practices are being used correctly and ensure there are no violations that are occurring due to lack of education. Overall, FASB would probably work together to ensure the U.S. recommendations prior to convergence have been either adopted or a sensible alternative be
The globalization of business has resulted in the need for compatible accounting standards that can be used internationally for financial reporting. As a result, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) to unify the various financial reporting methods and create a single accounting standard which can be applied to any financial statement worldwide (Byatt). The global standardization of financial reporting will increase the readability and enhance comparability of globally traded companies’ financial statements, without the need of conversion or translation. There are a few main differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (U.S GAAP). The increasing recognition and acceptance of the International Financial Reporting Standards by accounting professionals in the United States, will affect the way in which the U.S will record financial statements in the future.
The International Accounting Standards Board, (IASB), began life as the International Accounting Standards Committee (IASC) in the 1973. The IASC was created in June 1973 as a result of an agreement by the accountancy bodies of Australia, Canada, France, Germany, Japan, Mexico, the Netherlands, the United Kingdom and Ireland and the United States. These countries constituted the Board of IASC at that time.
The purpose of this document is to describe the nature, purpose and scope of accounting and it deliberately explains the details of each category in accounting. Accounting involves in preparing financial documents of an entity by analyzing, verifying, and reporting this records. It emphasizes its major characteristic role in field of banking and finance, with a mixture of supportive sub topics.
Accounting dates back as far as first centuries, is the language of business. As everything has gone through many changes, accounting has also changed many times through out the centuries. It went from the use of abacus to the most advanced softwares, and computers. With these drastic improvements nowadays accounting, financial accounting and management are facing big challenges. From the presentation of the reports to communication to the users, investors, and owners, the accounting field has gained totally a new shape from two decades ago. Today with the dynamic change in every aspect of life, the accounting field has to act fast and be able to adapt these new changes and challenges in order to survive.
For instance, banks often want basic financials to verify the a company can pay its debts, while the SEC required audited financial statements from all public