Publicly traded companies typically are subject to rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms operate on the cash method of accounting which can often be simple and straightforward. Larger firms most often operate on an accrual basis. Accrual basis is one of the fundamental accounting assumptions, and if it is followed by the company while preparing the financial statements, then no further disclosure is required. Accounting standards prescribe in considerable detail what accruals must be made, how the financial statements are to be presented, and what additional disclosures are required. The term ''generally accepted accounting principles'' (GAAP) was popularized in the late 1930s. Some important elements that accounting standards cover include identifying the exact entity which is reporting, discussing any "going concern" questions, specifying monetary units, and reporting time frames. In the public sector, 30% of 165 governments surveyed used accrual accounting, rather than cash accounting, in 2020.

Benefits

The lack of transparent accounting standards in some nations has been cited as increasing the difficulty of doing business in them. In particular, the Asian financial meltdown in the late 1990s has been partially attributed to the lack of detailed accounting standards. Giant firms in some Asian countries were able to take advantage of their poorly devised accounting standards to cover up immense debts and losses, which yielded a collective effect that eventually led the whole region into financial crisis.

Limitations

The notable limitations of accounting standards are their inflexibility, time-consuming process to create them, the difficulty of choosing between alternative treatments and their restrictive scope. Accounting standards were largely written in the early 21st century. Accounting scandals such as Worldcom and Enron illustrate that, despite all these efforts, widespread fraud can still occur, and even be missed by the outside auditors.

Accounting standards by nation

Canada Canada is a country in North America. Its Provinces and territories of Canada, ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, making it the world's List of coun ...

– Generally Accepted Accounting Principles (Canada) *

China China, officially the People's Republic of China (PRC), is a country in East Asia. With population of China, a population exceeding 1.4 billion, it is the list of countries by population (United Nations), second-most populous country after ...

– Chinese Accounting Standards (''Zhōngguó qǐyè kuàijì zhǔnzé'' 中国企业会计准则) *

France France, officially the French Republic, is a country located primarily in Western Europe. Overseas France, Its overseas regions and territories include French Guiana in South America, Saint Pierre and Miquelon in the Atlantic Ocean#North Atlan ...

– Generally Accepted Accounting Practice (''Plan Comptable Général'') *

Germany Germany, officially the Federal Republic of Germany, is a country in Central Europe. It lies between the Baltic Sea and the North Sea to the north and the Alps to the south. Its sixteen States of Germany, constituent states have a total popu ...

– Generally Accepted Accounting Practice (''Grundsätze ordnungsmäßiger Buchführung'') *

India India, officially the Republic of India, is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area; the List of countries by population (United Nations), most populous country since ...

– Indian Accounting Standards (Ind_AS) can be used by Any Company within the rules and regulations under Companies Act,2013 And Generally Accepted Accounting Principles (USA) is used by Foreign and Multinational company in India *

Italy Italy, officially the Italian Republic, is a country in Southern Europe, Southern and Western Europe, Western Europe. It consists of Italian Peninsula, a peninsula that extends into the Mediterranean Sea, with the Alps on its northern land b ...

– Principi contabili nazionali * Luxembourg - Luxembourg Generally Accepted Accounting Principles (Lux GAAP) * Nepal – Nepal Financial Reporting Standards *

Russia Russia, or the Russian Federation, is a country spanning Eastern Europe and North Asia. It is the list of countries and dependencies by area, largest country in the world, and extends across Time in Russia, eleven time zones, sharing Borders ...

– Russian GAAP *

Sweden Sweden, formally the Kingdom of Sweden, is a Nordic countries, Nordic country located on the Scandinavian Peninsula in Northern Europe. It borders Norway to the west and north, and Finland to the east. At , Sweden is the largest Nordic count ...

– BAS (accounting) *

Switzerland Switzerland, officially the Swiss Confederation, is a landlocked country located in west-central Europe. It is bordered by Italy to the south, France to the west, Germany to the north, and Austria and Liechtenstein to the east. Switzerland ...

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Swiss GAAP FER (''Fachempfehlungen zur Rechnungslegung'')
*

Turkey Turkey, officially the Republic of Türkiye, is a country mainly located in Anatolia in West Asia, with a relatively small part called East Thrace in Southeast Europe. It borders the Black Sea to the north; Georgia (country), Georgia, Armen ...

– Uniform Accounting Plan (Turkey) *

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...

– Generally Accepted Accounting Practice (UK) *

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

–

Generally Accepted Accounting Principles (United States) Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC), and is the default accounting standard used by companies based in the United States. The Financial Accounting ...

Domestic firms typically report in this format. Foreign firms that trade in the U.S. typically report in IFRS format (below). Statutory accounting principles are for insurance companies in the US.

Global standardization and IFRS

Many countries use or are converging on the International Financial Reporting Standards (IFRS) that were established and are maintained by the International Accounting Standards Board. In some countries, local accounting principles are applied for regular companies but listed or large companies must conform to IFRS, so statutory reporting is comparable internationally. All listed and grouped EU companies have been required to use IFRS since 2005, Canada moved in 2009, Taiwan in 2013, and other countries are adopting local versions. In the

, while "... the SEC published a statement of continued support for a single set of high-quality, globally accepted accounting standards, and acknowledged that IFRS is best positioned to serve this role..." progress is less evident."IFRS: Current situation and next steps"
pwc.com
Ken Tysiac January 10, 2013, journalofaccountancy.com

References

External links

*
FASAB Handbook of Federal Accounting Standards (2014)
{{Authority control Accounting systems