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In my assignment I will write about definition of accounting standard and that accounting standard mean the statements of code of practice of the regulatory accounting bodies that are to be observed in the preparation and presentation of financial statements. In layman terms, accounting standards are the written documents issued by the expert institutes or other regulatory bodies covering various aspects of measurement, treatment, presentation and disclosure of accounting transactions. In addition, definition of accounting report, frame of work and advantages and disadvantages of accounting standard. Finally, I hope my report overconfidence you.
2 Definition of Accounting Standard:
Accounting standard - a principle that governs current accounting practice and that is used as a reference to determine the appropriate treatment of complex transactions
2-1 Objective of Accounting Standards
Objective of Accounting Standards is to standardize the diverse accounting policies and practices with a view to eliminate to the extent possible the non-comparability of financial statements and the reliability to the financial statements.
2-2 The role of Accounting Standards
Accounting standards are necessary to promote high quality financial reporting. The fundamental role of accounting is to communicate economic information about businesses and other organization to various stakeholders including government, investors, shareholders, suppliers, lenders, customers and the general public. These stakeholders use such information to take decisions and to assess the stewardship of people appointed to manage such organizations. If this information is not of a high quality standard, then the stakeholders would be unable to take effective decisions that will benefit them. For example, if a financial report is manipulated to show higher profits, investors would hold on to their shares with the belief that the company is doing well.
Accounting standards came to be developed from the mid sixties onwards to promote the integrity of the accounting profession by way of ensuring uniformity in the way accountants report transactions in their books and also in their preparation of the final accounts of businesses. This is by and large aimed at boosting the confidence of stakeholders, particularly shareholders and potential investors in the accounting profession.
Good and useful information should have the essential characteristics of understandability, comparability, relevance and reliability in order to play its role effectively.
Accounting standards serve to promote the understandability, comparability, relevance and reliability of financial reports.
3 Definition of Accounting Report:
Accounting reports are documents filled out by brokers that details vital facts about a new client's financial circumstances and investment objectives. The report may be updated if there are material changes in a client's financial position. Based on the report a client may or may not be deemed eligible for certain types of risky investments such as commodity trading or highly leveraged limited partnership deals.
As large and small enterprises operate in quite different ways, it is not possible to apply the same accounting framework for all enterprises. A small enterprise is not simply a smaller version of a large enterprise. Considering this circumstance, only the most important accounting concepts and principles are listed here as good practices, which small enterprises should take into consideration when deciding on appropriate accounting systems.
Accrual basis accounting:
The bookkeeping is recommended to be prepared on an accrual basis. Accrual basis accounting provides a more accurate and complete picture of the enterpriseâ€™s financial position, performance and changes in its financial position than cash basis accounting.
The matching principle:
It may be helpful to use the matching principle in bookkeeping, because of the importance that revenues are matched with expenses to provide a truthful view of the enterpriseâ€™s financial performance.
The financial statements should present a true and fair view of the enterpriseâ€™s assets, liabilities, financial position and income and expenses. The application of this principle is very important to ensure that accounting information is presented accurately and consistently. Other principles follow from this principle.
5 Advantages of Accounting Standard:
IFRS improves the level of comparability between the accounts of companies across different countries.
The stringent disclosure requirements improve the visibility of liabilities such as future pension costs and employee stock schemes.
The adoption of IFRS can provide greater reassurance for investors, credit rating agencies and lenders, potentially giving companies access to lower-cost capital in line with the lower risk.
6 Disadvantages of Accounting Standard:
The adoption of IFRS can bring significant additional short-term costs to businesses, such as fees to pay specialist external accountants.
As adjustments to comply with IFRS can make year-on-year performance comparisons difficult for investment analysts, potentially creating uncertainty and stock price volatility, companies must also devote resources to the preparation of accounts using the legacy conventions
defined accounting standard as a â€œstatement of administrative writing is issued by the Authority accounting concerned and involved a specific financial statements of the economic union, and its results and which are determine the appropriate method of measurement and presentation, disposition and treatment of this element to determine the results of the work and presentation of financial position.
The need arose to make the necessary efforts to build an international trend of Accounting and strengthen the accounting profession on an international scale so that the profession are interlinked, of the assets of the prior and well-known and specific Vetojt these efforts to establish the Accounting Standards Committee, and that result in the provision of accurate and comparable information about the true financial performance and position of business.
In my opinion, accounting standards are important for investors and organization. It help to provide a clear financial future view and plan with high quality of financial performance.