Accounting Standards United States Report 2022

Running head: ACCOUNTING STANDARDS
ACCOUNTING STANDARDS
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ACCOUNTING STANDARDS1
Accounting standards are common set of principles, procedures and standards that defines
the basic of financial accounting practices and guidelines. Accounting standards also improves the
limpidity of the financial report across all countries. Each of the country has their own accounting
standard board, which complies with Financial Reporting Standard Board (Laux & Stocken, 2018).
In the United States, the Generally Accepted Accounting Principles (GAAP) standards are widely
known and accepted across all organisations. International companies follows International
Financial Reporting Standards (IFRS) set by International Accounting Standard Board and serve the
guidelines for non-U.S GAAP companies (Shroff, 2017). In Australia, the Australian Accounting
Standard Board is responsible for developing a single set of high quality understandable accounting
standard. The accounting standard board always focuses to develop the accounting standards in a
way that provide transparent and comparable information’s in general purpose of financial
statements. Accounting standards relates to all aspects of equity finances, including assets,
liabilities, expenses, revenue and shareholder equity (Standard, 2017). Examples of accounting
standards includes asset classification, revenue recognition, allowable methods for depreciation,
lease classification and outstanding share measurement. Each of the organisation follows
accounting standards without which, the country can impose legal charges to it.
In the business world, accounting standards has gain much popularity. Each of the
organisation which wishes to expand their business should comply with IFRS and GAAP otherwise
that organisation will not be allowed for expansion. The importance of accounting standards are
given below.
Comparison
Accounting standards brings the universality towards financial record keeping. Accounting
standard aids the management to easily compare their business operation with similar business
operation. This helps both internal and external stakeholders of the business to understand the
current situation of the business, allowing them to invest in the right business for them. If two
companies follows two different method of accounting, it becomes hectic to compare between them
(Boateng, Akamavi & Ndoro, 2016). For example, A company follows LIFO method and B
company follows FIFO method. Accounting standards aids the firm to solve the problem by
bringing one uniform system of accounting.
Uniformity
Accounting standards brings uniformity to the whole accounting process of an organisation.
This aids all company to record their financial records in same rules and regulation, allowing the
management and outsiders of the organisation to review their business effectively. For example,

ACCOUNTING STANDARDS2
Accounting standard 6 governs the entire depreciation accounting therefore all organisation will be
following AS-6 for substances concerned with depreciation (Gope, 2018).
Assistance to auditors
Not only accounting standards aids the organisation, it also assists the auditor to audit the
firm effectively. It simplifies the audit procedure and makes it easy for them to perform the audit for
an organisation. Accounting standards has established different standards, guidelines and
regulations to be trailed by companies in their accounting system. These guidelines are mandatory
to be followed by each company. In addition, these rules governs the whole presentation of
accounting of a company therefore if an auditor gets assured that the organisation follows proper
accounting standards then he can easily verify and audit the financial reports of the organisation
(Allen, Ramanna & Roychowdhury, 2018).
Makes accounting process easier
Accounting standards simplifies the whole information of a financial report, and aids
management to evaluate their financial information effortlessly. Accounting standard provides
standards for each and every transaction of the organisation, removing the complexity of the
transactions. Standard and uniform process aids the user to easily understand the whole process of
accounting and protects them from misleading information in the statements (Gao, Jiang & Zhang,
2019). For example, Accounting Standard 3 clearly mentions the guidelines and regulations
regarding cash flow under three main heads. These three heads and operating activities, investing
activities and financial activities. This helps users of the report easily understand the cash flow of
the organisation effectively.
Avoidance of fraud and manipulation
Accounting standards plays a notable role in prevention of errors and fraud in the accounting
statement of an organisation. Frauds and manipulations has adverse effect in the financial condition
of an organisation. Accounting standard board forces every organisation to maintain their
accounting standard in the organisation by which it reduces the chance of fraud and manipulation in
the organisation. Accounting standards establishes various rules, regulations and principals for
every organisation. These accounting principles governs complete accounting process of the
organisation. These principals are not mandatory but optional following these principal aids the
organisation to improve the ethics of the financial records. With these principals, it becomes
impossible to mispresent and manipulate the financial statement of the organisation. In addition,
committing any fraud becomes harder for them (Zhang, 2017).