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Publicly traded companies typically are subject to the most 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 The cash method of accounting, also known as cash-basis accounting, cash receipts and disbursements method of accounting or cash accounting (the EU VAT directive vocabulary A vocabulary, also known as a wordstock or word-stock, is a set of fam ...
which can often be simple and straight forward. Larger firms most often operate on an
accrual basisAccrual (''accumulation'') of something is, in finance, the adding together of interest or different investments over a period of time. It holds specific meanings in accounting, where it can refer to accounts on a balance sheet that represent liabili ...
. 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. 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.


Limitations

Accounting standards were largely written in the early 21st century. Massive ''accounting irregularities'' at large firms such as
Worldcom MCI, Inc. (subsequently Worldcom and MCI WorldCom) was a telecommunications company. For a time, it was the second largest long-distance telephone company in the United States, after AT&T. Worldcom grew largely by acquiring other telecommunica ...
and
Enron Enron Corporation was an American energy In physics, energy is the physical quantity, quantitative physical property, property that must be #Energy transfer, transferred to a physical body, body or physical system to perform Work (thermod ...
illustrate that, despite all these efforts, widespread fraud can still occur, and even be missed by the outside auditors.


Benefits of accounting standards

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.


Common accounting standards around the globe

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International Financial Reporting Standards International Financial Reporting Standards, commonly called IFRS, are accounting standard Publicly traded companies typically are subject to the most rigorous standards. Small and midsized businesses often follow more simplified standards, plus ...
This standard is adopted in whole, or in large part, by many countries. It is acceptable in the U.S. (for a firm located outside of the U.S.) to report in this widely accepted format. Accounting standards by nation *
Canada Canada is a country in the northern part of . Its extend from the to the and northward into the , covering , making it the world's . Its southern and western , stretching , is the world's longest bi-national land border. Canada's capital ...

Canada
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Generally Accepted Accounting Principles Publicly traded companies typically are subject to the most rigorous standards. Small and midsized businesses often follow more simplified standards, plus any specific disclosures required by their specific lenders and shareholders. Some firms opera ...
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China China (), officially the People's Republic of China (PRC; ), is a country in . It is the world's , with a of more than 1.4 billion. China spans five geographical and 14 different countries, the in the world after . Covering an area of ap ...

China
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Chinese Accounting StandardsChinese accounting standards are the accounting rules used in People's Republic of China, mainland China. As of February 2010, the Chinese accounting standard systems is composed of Basic Standard, 38 specific standards and application guidance. Chi ...
(''Zhōngguó qǐyè kuàijì zhǔnzé'' 中国企业会计准则) *
France France (), officially the French Republic (french: link=no, République française), is a spanning and in the and the , and s. Its extends from the to the and from the to the and the ; overseas territories include in , in the N ...

France
- Generally Accepted Accounting Practice (''Plan Comptable Général'') *
Germany Germany (german: Deutschland, ), officially the Federal Republic of Germany, is a country in . It is the in Europe after , and the most populous . Germany is situated between the and seas to the north, and the to the south; it covers an area of ...

Germany
- Generally Accepted Accounting Practice (''Grundsätze ordnungsmäßiger Buchführung'') *
India India, officially the Republic of India (Hindi: ), 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 and dependencies by population, second-most populous ...

India
- Indian Accounting Standards * Luxembourg - Luxembourg Generally Accepted Accounting Principles (Lux GAAP) *
Nepal Nepal (; ne, नेपाल ), officially the Federal Democratic Republic of Nepal ( ne, सङ्घीय लोकतान्त्रिक गणतन्त्र नेपाल ), is a landlocked country in South Asia. It is ma ...

Nepal
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Nepal Financial Reporting Standards {{Accounting , expanded=al Nepal Financial Reporting Standards (NFRS) are designed as a common global language for business affairs so that company accounts are understandable and comparable within Nepal. The rules to be followed by accountants to ...
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Russia Russia ( rus, link=no, Россия, Rossiya, ), or the Russian Federation, is a country spanning Eastern Europe Eastern Europe is the eastern region of . There is no consistent definition of the precise area it covers, partly because th ...

Russia
- Russian GAAP *
Sweden Sweden ( sv, Sverige ), officially the Kingdom of Sweden ( sv, links=no, Konungariket Sverige ), is a Nordic country The Nordic countries, or the Nordics, are a geographical and cultural region In geography, regions are areas that ...

Sweden
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BAS (accounting) The Swedish BAS chart of accounts (Basic chart), represents the Swedish accounting GAAP and is an open to use chart of accounts for accounting Accounting or Accountancy is the measurement ' Measurement is the number, numerical quantification ( ...
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Switzerland , french: Suisse(sse), it, svizzero/svizzera or , rm, Svizzer/Svizra , government_type = Federalism, Federal semi-direct democracy under an assembly-independent Directorial system, directorial republic , leader_title1 = Fe ...

Switzerland

Swiss GAAP FER (''Fachempfehlungen zur Rechnungslegung'')
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United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain,Usage is mixed. The Guardian' and Telegraph' use Britain as a synonym for the United Kingdom. Some prefer to use Britain as shorth ...

United Kingdom
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Generally Accepted Accounting Practice (UK) Generally Accepted Accounting Practice in the UK, or UK GAAP, is the overall body of regulation establishing how company accounts must be prepared in the United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known ...
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United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

United States
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Generally Accepted Accounting Principles (United States) Generally Accepted Accounting Principles (GAAP or U.S. GAAP, pronounced like "gap") is the accounting standard Publicly traded companies typically are subject to the most rigorous standards. Small and midsized businesses often follow more simpli ...
Domestic firms typically report in this format. Foreign firms that trade in the U.S. typically report in IFRS format (below).


Global standardization and IFRS

Many countries use or are converging on the
International Financial Reporting Standards International Financial Reporting Standards, commonly called IFRS, are accounting standard Publicly traded companies typically are subject to the most rigorous standards. Small and midsized businesses often follow more simplified standards, plus ...
(IFRS) that were established and are maintained by the
International Accounting Standards Board The International Accounting Standards Board (IASB) is the independent, accounting standard Publicly traded companies typically are subject to the most rigorous standards. Small and midsized businesses often follow more simplified standards, plus ...
. 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
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...

United States
, 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


See also

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Center for Audit Quality The Center for Audit Quality (CAQ) is an autonomous, nonpartisan Nonpartisanism is a lack of affiliation with, and a lack of bias toward, a political party A political party is an organization that coordinates candidates to compete in a coun ...

Center for Audit Quality
(CAQ) *
Constant item purchasing power accounting Constant purchasing power accounting (CPPA) is an accounting model approved by the International Accounting Standards Board The International Accounting Standards Board (IASB) is the independent, accounting standard Publicly traded companies typic ...
* Convention of consistency * Philosophy of accounting * Statutory accounting principles for insurance companies in the US


References


Further reading

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Meeks, Geoff Geoffrey (Geoff) Meeks (born 1949) is a British accounting scholar and Professor of Financial Accounting at the University of Cambridge, known for his work "Accounting standards and the economics of standards." Biography Meeks obtained his BA i ...
, and GM Peter Swann. "Accounting standards and the economics of standards." ''Accounting and Business Research'' 39.3 (2009): 191-210m


External links

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