Table of Contents. Theoretical aspects of accounting and the main principles of accounting. The special accounting standards in European Union. The future of accounting standards. 1. Theoretical aspects of accounting and the main principles of accounting. For fairly and consistently financial statement every national or multinational company needed accounting standards and describe the financial performance. Without standards, users of financial statements would need to learn accounting rules of each company and comparison between companies would be difficult. The international globalization of all markets and companies has increased the demand for internationally comparable highs quality accounting information resulting from a common set of accounting rules.
Despite a lot of remarkable efforts of international harmonization for more than 25 years, accounting regulation is still the domain of national legislators or delegated standard setters. Accounting is the recording, classifying, summarizing and interpreting of financial events and transactions to provide management and other interested parties the information they need to make better decisions. Transaction include buying and selling goods and services, acquiring insurance, using supplies. Financial accounting relies on few underlying concepts that have huge and significant impact on the practice of accounting. Assumption. Separate entity assumption the business is an entity that is separate and distinct from its owners, so that the finances of the firm are not co-mingled with the finances of the owners. Going concern assumption the business is going to be operating for the foreseeable future. Stable monetary unit assumption that means the U.
The Essay on Securities And Exchange Commission Accounting Financial Standards
... Commission (SEC) has statutory authority to establish financial, accounting and reporting standards for publicly held companies under the Securities Exchange Act of 1934. However ... consist of: monitoring costs, bonding expenditures, and residual loss. Some assumptions of PAT are the following: all individual action is driven ...
S. dollars Fixed time period assumption info prepared and reported periodically (quarterly, annually, etc).
Principles The basic assumption of accounting result in the following accounting principles: historical costs principle assets are reported and presented at their original cost and no adjustment is made for changes in market value. One never writes up the costs of an assets. Accountants are very conservative in this sense. Sometimes costs are written down, for example, for short-term investments and marketable securities, but costs never are written up. Matching principles matching of revenues and expenses in the period earned and incurred.
Revenue recognition principle revenue is realized (reported on books as earned) when everything is necessary to earn the revenue has been completed. Full disclosure principle al of the information about the business entity that is needed by users is disclosed in understandable form. Accounting standards are guidelines that specify the accounting treatment for financial transactions. Such standards are used to ensure the comparability, consistency, and completeness of financial records. Accounting standards may be national, such as the standards developed by a countrys national accountants organization, or international, such as the international accounting Standards developed by the International Accounting Standards Committee. It is important to recognize differences between accounting standards and methods when comparing financial information from different institutions or countries.
Types of accounting standards and methods For understanding accounting standards and methods three major issues should be considered: Overall standards. Accounting standards and methods can vary by country and even by entity. Many countries have generally accepted accounting principles (GAAP), established by a national professional association of accountants or an accounting standards board. In the absence of national standards, some countries use French GAAP, U.K. GAAP, or U.S. GAAP. Other countries use IAS, which are widely accepted around the world. MFIs operating in a country that has neither a strong professional accounting body nor national standards should consider using IAS.
The Term Paper on Harmonisation Of Accounting Standards
International accounting harmonisation can be defined as “the process of bringing international Accounting Standards into some sort of agreement so that the financial statements from different countries are prepared according to a common set of principles of measurement and disclosure”. Harmonisation means that deviating rules, which do not exclude themselves, can continue to exist ...
Accounting methods. Within the context of accounting standards, different accounting methods may be used. Many MFIs use the accrual basis of accounting. Under accrual-based accounting the financial effects of transactions and events are recognized in the periods in which they occur, rather than when cash is actually exchanged. The accrual basis of accounting is in accordance with most accounting standardsetting bodies. Some MFIs, however, use a cash basis of accounting, recognizing receipts and payments only when cash is received or paid.
The cash basis of accounting is often used in the preparation of financial statements for government entities. In some cases donors that fund MFIs request that the MFIs report on a cash basis. To be conservative, some MFIs use a mixed basis of accounting, accruing expenses but not income. Industry practices. In developing its accounting procedures, an MFI often has the choice of using the industry practices of financial institutions or of nonprofit entities. Financial institutions take a more enterprise-oriented approach to accounting for their operations, showing entity capital and consolidating subsidiary operations.
Nonprofits tend to use a fund accounting approach, which segregates funding and expenses by project, activity, or program. Many MFIs use fund accounting because of their NGO status and because they receive large amounts of donor funding. However, an increasing number of MFIs are adopting a financial institution approach. To maintain the credibility of its financial statements, an MFI must adhere to a recognized, comprehensive set of accounting standards. An MFI may want to consider retaining the services of a reputable certified public accountant or accounting firm to design an accounting system that complies with national and international standards, and to train staff in the systems use. 2. The special accounting standards in European Union.
The Essay on Need For Harmonization Of International Accounting Standards
Introduction As there has been a tremendous growth in the market place with the existing accounting practices, this leads us to question why do we need harmonization of International accounting standards, what are its advantages and what are the barriers that hinder harmonization? Although accounting may be the "language of business," a common language has never been necessary -- at least as long ...
The International Accounting Standards is a set of standards stating how particular types of transactions and other events should be reflected in financial statements. The IAS are issued by the Board of the International Accounting Standards Committee. Although IASC has no formal authority to require compliance with its accounting standards, many countries and the EC require the financial statements of publicly-traded companies to be prepared in accordance with IAS. Many countries already endorse International Accounting Standards as their own either without amendment or else with minor additions or deletions. Furthermore, important developments are taking place in the European Union, where the European Commission is progressing proposals that will require all listed companies in the European Union to prepare their consolidated financial statements using International Accounting Standards. Already, both inside and outside the EU, many leading companies have stated that they prepare their financial reports in accordance with International Accounting Standards.
Other countries do not permit companies to use IAS without a reconciliation to domestic generally accepted accounting principles. Most notable among these countries are Canada, Hong Kong, Japan, and the United States. International Accounting standards one of the most commonly used worldwide, ahead of U.S. GAAP, though many countries use IAS standards only as a guideline or a basis for their own accounting rules. So, the influence of the IASC is spreading. Among the dozens of countries that follow some form of IAS are France, Germany, China, Italy, Croatia, Japan, Singapore and Egypt. Its likely the IASC will greatly influence the accounting standards used with the advent of the European Union – the European Commission announced a few years ago that it wants to ally itself with the IASC in an effort to reach international harmonization of accounting standards.
The Essay on Accounting Standards International Ifrs Financial
To help you imagine what your company's accounts might look like under International Financial Reporting Standards, we have published fictitious financial statements for various types of entities to illustrate the disclosure and presentation requirements. In May 2002 the International Accounting Standards Board (IASB) published a revised Preface to International Financial Reporting Standards which ...
Jackson Day, Practice Fellow at the Financial Accounting Standards Board, said, “The IASC standards tend to be very general in nature. We [at FASB] had raised concerns [over IAS 38] in three or four areas.” When companies allow to report intangible assets, they may be having an opportunity to record more assets on their balance sheet and, subsequently, another tool to dress up those financial statements. On the other hand, as long as investors remain out of the loop about intangible investments, they may discount the value of intellectual capital. If they are given that information in a financial statement, they could be better informed to make their investment decisions. The debate over intangible assets will continue to be waged. But the IASC has now taken the first big step toward recognizing what could be a major fault of an accounting system thats operating.
As the Eurodollar takes off and countries continue moving into an economy of ideas and intellectual assets, they will certainly need accounting practices that follow suit. Proponents of international accounting standards established by the International Accounting Standards Committee contend that the measure will deepen European market integrat.
