Accounting Standards? Over Time Essay

Pages: 3 (952 words)  ·  Style: Harvard  ·  Bibliography Sources: 3  ·  File: .docx  ·  Level: College Senior  ·  Topic: Accounting

SAMPLE EXCERPT . . .
In the absence of accounting standards, each business would present its financial statements in a different format, thus making such comparisons impossible.Buy full Download Microsoft Word File paper
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Essay on Accounting Standards? Over Time, Quite Assignment

Next, it should also be noted that accounting standards enhance not only the credibility but also the reliability of financial statements. In a way, when there is inexactness and ambiguity in the interpretation of financial statements, scandals and inappropriate accounting practices are likely to crop up. Accounting procedures that could bring about the said ambiguity include depreciation methods, stock valuation, etc. As Arner (2007) points out, the credibility of an entity's accounting systems is critical when it comes to the provision of financial information to be relied upon by stakeholders as they seek to evaluate not only such an entity's financial strength and past performance but also its ability to perform well going forward. A significant number of stakeholders rely on financial statements to make decisions that are expected to be economically sound. These stakeholders include creditors, employees, investors, suppliers, regulatory agencies, and other interested parties. Accounting standards present a framework for the presentation of credible, accurate, and complete financial statements. Indeed, "the best assurance that financial statements contain understandable information is if they are prepared and presented in accordance with accounting standards and principles that are generally acceptable internationally" (Arner, 2007, p.172). Creditors need to rely on financial statements that present a true picture of the financial condition of firms. On the other hand, investors and employees (both existing and potential) also need to make informed decisions on which companies to associate with going forward. Similarly, regulatory bodies such as tax authorities must rely on accurate financial records so as to accurately compute tax liability amongst other things. It should also be noted that when business entities make use of similar accounting standards, it becomes relatively easy for the relevant regulatory bodies as well as audit departments to spot inconsistencies and inadequacies. By issuing recommendations on how specific economic transactions should be recognized, accounting standards effectively protect the interests of a wide range of stakeholders.

Conclusion

In conclusion, it is important to note that the smooth conduct of global business is largely dependent on the successful adoption of standardized accounting standards. As I have already pointed out elsewhere in this text, the world is increasingly becoming borderless. For this reason, there is a need for business entities to present their financial statements in a format that in addition to enhancing accuracy also simplifies interpretation. Thus in the final analysis, the relevance of accounting standards cannot be overstated.

References

Arner, D.W., 2007. Financial Stability, Economic Growth, and the Role of Law. New York, NY: Cambridge University Press.

Fischer, P.M., Taylor, W.J. And Cheng, R.H., 2011. Advanced Accounting. 11th ed. Mason, OH: Cengage Learning.

Wahlen, J.M., Jones, J.P. And Pagach, D.P., 2012. Intermediate Accounting: Reporting and Analysis. Mason, OH:… [END OF PREVIEW] . . . READ MORE

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