Why Is There An Ongoing Need To Set Additional Government Accounting And Financial Reporting Standards?

In 1973 the Financial Accounting Standards Board (FASB) was established to set the financial accounting standards in the United States of America for nongovernmental entities. These standards are collectively called U.S. Generally accepted Accounting Principles, or U.S. GAAP. The Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants acknowledge the authority of these standards (FASB, n.d). A “proven, independent due process” is used to collect the viewpoints of the financial statements prepares and users for the constant improvement of these standards. An Accounting Status Update(ASU) is not an authoritative source however documents the amendments to communicate the changes in the FASB Codification for a user to understand the reason and future of those changes (FASB, n.d).

SFAC No. 8 addresses the cost constraint on useful financial reporting, “Cost is a pervasive constraint that standard setters, as well as providers and users of financial information, should keep in mind when considering the benefits of a financial reporting requirement.” (SFAC No. 8 BC 3.47) However, the ability to place a dollar value and fully enumerate a cost or benefit is almost an impossible task for standard-setters. Additionally, there is no way to successfully identify and measure all of the economic consequences associated with a new standard. The FASB should be applauded though for advancing uniformity in accounting standards, however; uniform financial reporting suggests a one size fits all approach. “Smaller, non-publicly listed firms (and their auditors) argue that accounting standards are formulated mainly for larger, publicly traded firms” and that “compliance costs are disproportionately higher and the

Just for clarity, according to "Governmental Accounting Standards Board" (2013), the financial reporting entity consists of (a) the primary government; (b) organizations for which the primary government is financially accountable; and (c) other organizations for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity 's financial statements to be misleading or incomplete (Summary of Statement No. 14 The Financial Reporting Entity (Issued 6/91)).

This research project will inform the reader of the difference between the United States accounting standards and International accounting standards. The United States uses the Financial Accounting Standards Board (FASB) to issue financial reporting procedures. The International Financial Reporting Standards (IFRS) are issued by the International Accounting Standards Board (IASB). There are proposals for the United States to adopt the International standards. Financial reporting procedures are debated about the United States using the Generally Accepted Accounting Procedures (GAAP) or following the global procedures. This

The FASB mission is to “establish and improve standards of financial accounting and reporting that foster financial reporting by nongovernment entities that provides decision- useful information to investors and other users of financial reports.” (www.FASB.org)

117,” n.d.). These guidelines have been established to provide consistency in reporting and transparency in financial processes.

The article "The Politicization of Accounting: The impact of politics on accounting standards" by David Solomons discusses the relationship between the field of accounting and politics. Government agendas are meant to work towards achieving economic growth, both on a micro and macro level. Since the Financial Accounting Standards Board (FASB) has the ability to create policies that aid the government with their goals, the FASB are obligated to use their power to benefit the government, the economy, and in turn the greater public. Both politicization and neutrality have benefits, but each have the potential to solely benefit certain stakeholders, becoming exclusionary to other interest groups. The reason that the politicization or neutrality of accounting standards is so widely debated is because of the varying opinions regarding what the standards should accomplish. Neutrality and politicization have an inverse relationship where there is a trade-off between the two; losing information neutrality results in more politically influenced standards, while maintaining impartiality results in less politicization. The most crucial trade-off that exists in this relationship is the one between relevance and reliability. Information neutrality leads to more reliable information because neutrality eliminates bias of any single stakeholder. Therefore, when accounting standards are free from political influence they are more likely to benefit the greatest amount of financial statement

Secondly, the claim made by ‘free market’ perspective to treat accounting information as other normal goods should be rejected because accounting information are unlike normal goods such as bread or house. It is a public good because the use of it by one investor does not prevent the usage of others (Hendriksen & Breda 1992, p.247). As non-investors have right to use the accounting information such as income statement and balance sheet as much as investors, investors will not agree to pay for the financial reports because others will become free-rider; thus, this prevent the function of normal pricing system of accounting information. As no income is received by producers of financial reports, they will not willing to produce it or will underproduce it so ‘free-market’ perspective is not applicable. Under this circumstance, Demski and Feltham (cited in Deegan 2009, p.65) states that for public good like accounting information, a more collective approach to its production is more desirable. This can be achieved by legislatively regulating the productions of accounting information so companies will produce the accounting information to meet the demands of external users and thus ensuring efficient capital market.

Define the extent of judgment in planing financial statements by formulate the characteristic, functions and limits of financial accounting and reporting. It also increases comparability of financial statements by decreasing the number of alternative accounting methods. If standards were derived from a reasonable style of concepts, this will lower the accountants error to political tension. Likewise, reporting requirement will be more constant and fair because they will stem from an orderly set of concepts. The need for specific accounting standards will be reduced. The setting requirement will be more economical because issues should not be re-debated from different viewpoints. Enhance the credibility of financial reporting and in turn help to reduce accounting’s vulnerability to political

A segment is a distinguishable activity or group of activities of an entity for which it is appropriate to separately report financial information for the purpose of evaluating the entity’s past

Accounting standard refers to a set of standardised practices in accounting which bind together existing procedures in one unformed practice. They are of paramount importance for any business as they provide information needed for investors and capital markets. By using them we can compare and draw conclusions regarding business financial condition and whether financial control has been effective in relation to the company. Accounting standards are also necessary for the companies to provide any interested stakeholders with precise and detailed information which can be understood across different businesses. If we would not have accounting standards in place than the comparative analysis for many businesses would not be possible. Without them there would be more errors and mistakes in

There been conflict in most western countries between private sector bodies and the governmental bodies concerning the process of establishing regulatory arrangements required for setting accounting standards (Hopwood et.al 2005). The recent changes by the Australian Federal Government regarding the structure of setting the accounting standards show a huge shift in power to the government from the professional bodies. Majority of the users of financial reports often try to influence the accounting standard with the aim of protecting their own interests. Standard setters in Australia are having

As the globalization of markets has become more prominent in recent years, many are wondering why a single set of accounting standards are not followed. After all, English may be the business language, but accounting is the language of business. Accounting standards are essentially just rules that must be followed when reporting any accounting data on any of the company’s financial statements. The objective is to provide the user (creditor or investor) with relevant information of the company’s financial position so that users then can compare it with another company’s financial statements and proceed to make an informed decision. With only that objective in mind, it can be seen why a common set of accounting standards would be beneficial.

The existing Conceptual Framework of IASB’s was developed by its predecessor body IASC (International Accounting Standards Committee) in 1989. The material on the objective of financial reporting was first revised by the IASB in 2010 with the US national standard-setter, the Financial Accounting Standards Board (FASB). This ED sets out the proposal for a revised Conceptual framework. It has been developed on the behalf of responses received on (‘the Discussion Paper) which was published in July 2013. (IFRS, May 2015)

For many years, countries have created their own accounting standards which was either rules based, principle based, tax oriented, business based, etc which as a result, made them all different. There eventually came a need for harmonization since the world was undergoing globalization. As we approached the late 1990’s, we saw two predominant standards which was GAAP and IFRS. It is now clear that the world is moving to a more