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A principle that guides and standardizes accounting practices. The Generally Accepted Accounting Principles is a group of accounting standards that are widely accepted as appropriate to the field of accounting. Accounting standards are necessary so that financial statements are meaningful across a wide variety of businesses; otherwise, the accounting rules of different companies would make comparative analysis almost impossible.  Comparative analysis would also be difficult for multi national and regional organizations as they try to do manage their business in different regions of the world. Several companies now operate globally and are no longer limited to one geographical area.
The accounting standards are described as a guideline for financial accounting and how a firm prepares and presents its business income and expense, assets and liabilities statements.
In this research I will be discussing accounting standards, why is it necessary, different standards, and benefits of it and international accounting standards.
Accounting standards were first developed in in the early 1930s following the Great Depression. Before this account was said to be difficult and very time consuming as different companies would use different ways thus making it difficult for another to understanding account be presented, this lead to the forming of an accounting body know as the Accounting Standards Committee (ASC), they issued a number of accounting standards called Statements of Standard Accounting Practice (SSAP). In 1990 the ASC was switched to the Accounting Standards Board, this accounting board issued standards known as Financial Reporting Standards (FRS), these two standards were enforced by the company law.
There are many different types of accounting standards today, by the end of year 2001 nineteen FRSs were issued and from the SSAPs 10 were still in force. The ASB issued the Urgent Issue Task forces Abstracts (UITFs), this standard was enforced when they were either amending or introducing a standard, it is said that about thirty UITFs are issued and to date are still enforced. In November 1997 the ASB introduce a third category of standards which was geared to the smaller companies the standards is known as the Financial Reporting Standard for smaller Entitles (FRSSE).
The benefits of the standards are to remove variations and to make accounting standardization when being observed or presented it also regulatory accounting procedures and making investment decision much easier; by standardizing accounting it reduces the cost on countries and for countries that cannot afford accounting standards on their own or have problem establishing and maintaining one.
By standardizing accounting this does not mean that two different companies will have the same revenue, expenditure for financial statements. The companies will have similar accounting procedures and guidelines which makes it easier for analysis of the accounting information. Without the use of accounting standards accounting users would have to learn the accounting rules for each company which would be very time consuming and the comparison between companies would be hard to nearly impossible. It would also be costly to the companies to train accountants to read and analyse the accounting information around the world and even within the same organization where the company has different branches around the world. The lack of accounting standards would also impede investment decisions and so would be quite costly to global and regional organizations whose viability depends on them being globally competitive. Standardization of accounting therefore fosters better and speedier investment decisions.
Besides the ASB there is an international accounting standards committee which was introduce in the late 1973, it was introduce to encourage international cooperation in developing consistent worldwide accounting standards, the was then changed in 2000 to International Accounting Standards Board (IASB). The need for this standard was four main points which were:
The considerable growth in international investments
The growth in the number of multinational organizations
As quite a few countries now have their own standard setting bodies
The need for accounting standards in countries that cannot afford a standard setting body on their own.
The IASB issued International Accounting Standards (IAS) and International financial Reporting Standards (IFRS).
In the formation of the IASC there was no formal authority as a result the IAS standard was mostly voluntary and was manly used in countries that did not have any accounting standards or had problems establishing and maintaining one. While it is voluntary for private traded companies publicly traded companies are required to use a standardized accounting to present their financial statements. Some financial institutions such as banks and lending agencies also require private traded companies to use them as well. This is easily understood as investors will more readily invest in companies whose financial statements are standardized and easy to understand. They can therefore track their financial investment and know when to buy and when sell their shares in a company.
A lot of companies trade on the stock market and require foreign investment to grow and expand their business. In order for this to happen foreign investors need to be able to read and understand their financial statements. The standardization of accounting information has not only made this possible but makes it easier for investors to make quick decisions on whether to invest in a company or not.