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What ARE THE ROLE OF INTERNATIONAL ACCOUNTING STANDARDS BOARD?
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Role of cost accounting in managerial decision making?
Asked in Jobs & Education, Business Accounting and Bookkeeping, Financial Statements, The Difference Between
Why are Accounting Standards necessary?
The role Of Accounting Standards Accounting standards are necessary to promote high quality financial reporting. The fundamental role of accounting is to communicate economic information about businesses and other organization to various stakeholders including government, investors, shareholders, suppliers, lenders, customers and the general public. These stakeholders use such information to take decisions and to assess the stewardship of people appointed to manage such organizations. If this information is not of a high quality standard, then the stakeholders would be unable to take effective decisions that will benefit them. For example, if a financial report is manipulated to show higher profits, investors would hold on to their shares with the belief that the company is doing well. Accounting standards came to be developed from the mid sixties onwards to promote the integrity of the accounting profession by way of ensuring uniformity in the way accountants report transactions in their books and also in their preparation of the final accounts of businesses. This is by and large aimed at boosting the confidence of stakeholders, particularly shareholders and potential investors in the accounting profession. Good and useful information should have the essential characteristics of understandability, comparability, relevance and reliability in order to play its role effectively. Accounting standards serve to promote the understandability , comparability, relevance and reliability of financial reports.
Asked in Business & Finance
What role do standards organizations play in quality assurance?
Discuss the role of accounting in modern business.?
What is the role of accounting equation in the study of accounting equation?
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What is the role of accounting concepts in preparation of financial statements?
Financial accountants produce financial statements based on generally accepted accounting principles of a respective country. In particular cases financial statements must be prepared according to the International Financial Reporting Standards. Financial accounting serves the following purposes: producing general purpose financial statements producing information used by the management of a business entity for decision making, planning and performance evaluation Producing financial statements for meeting regulatory requirements.
Asked in Industries and Professions
How accounting profession could fit into globalization effort in the 21st century?
Globalization can simply be defined as the existence of a situation where there is an easy access to any part of the world. This could be in terms of information on any subject matter. With each passing day the business world gets a little smaller as a result of globalization. Each day, it becomes harder for the accountant to remain insulated from what goes on outside of their countries' borders. The accountant as a professional is faced with this situation businesses expand sometimes beyond country borders in response to globalization. Patricia J. Arnold ( School of Business Administration, University of Wisconsin-Milwaukee) in her article entitled "Corporate-led Globalization: Restructuring the Market for Accounting Services" identified two models of globalization: I. Market-led globalization: This theoretical model asserts the primacy of market forces in the process globalization. The market-led model technological advances such as digital technologies, have given rise to global markets. Global markets, in turn, create the need for transparency and accountability. Auditing and accounting supposedly to serve this need by mitigating the agency problem caused by information asymmetries in the capital markets. The accounting profession plays a reactive role within the model. For markets to function properly, the accounting profession must adapt and modernize in response to the globalization of finance and investment. This theoretical model has been used to argue in support of adaptive responses ranging from global professional credentialing to the adoption of International Accounting Standards (IAS). The market-led model views resistance to change on the part of state regulators and professional associations as outmoded rigidities that must eventually give way to impersonal forces of globalization and the imperatives of market efficiency. Although widely accepted, this market-led view of globalization is based on assumptions that fail to recognise the active role that institutional actors namely corporations, industries, nation states, and international institutions like the International Monetary Fund (IMF), World Bank, and World Trade Organization (WTO) have played in the creation of global markets. II. In contrast to the market-led model of globalization, the corporate-led model recognizes the agency of nation states, corporate interests, and international institutions in the creation of global markets. Whereas the market-led model begins with global markets and ends with state and industry adaptation, the corporate-led model begins with institutional agency and culminates in the creation of global markets. The corporate-led model not only provides non-functionalist explanation of how global financial and investment markets were created; it can also explain the accounting profession's role in the globalization process. The corporate-led model posits that the accounting profession does not merely adapt to forces of globalization. To the contrary, the accounting industry, in reliance with the state and international institutions, has played and continues to play an active role in the structuring global markets for accounting services. The globalization of the 21st century even though has a lot of benefits, poses some threats to accountants and the accounting profession as a whole. There are three groups of accountants who are prone to these threats. These groups are: * Accountants working for (or providing outside services to) foreign-owned companies. * Accountants working for (or providing outside services to) locally-based enterprises that are expanding internationally. * Accountants whose knowledge, skills, and abilities limit them to performing only low-value, compliance-oriented work. There also two groups of accounting professionals that are most likely to benefit from increased globalization. These are: * Accountants who expand their financial accounting knowledge, skills, and abilities so as to gain mastery of changing local and International Accounting Standards (IAS). * Accountants who complement their compliance-oriented knowledge, skills, and abilities with the performance oriented knowledge, skills, and abilities of management accounting. Bruce Pounder, CMA, CFM, in his article; "How Globalization is Affecting U.S Accountants", said efforts are being made to mitigate the above threats of globalization in recent years. He made reference to the fact that, compliance with the International Financial Reporting Standard (IFRS) promulgated by the International Accounting Standard Board (IASB) is now required of publicly-traded companies in most countries. In addition to the efforts to fit the accounting profession in the globalization of the 21st century, Bruce Pounder in his article stated that, while there many similarities between the international standards and the U.S. Generally Accepted Accounting Principles (G.A.A.P.), significant differences do exit and today, U.S standards are not automatically presumed to be 'better'. This situation has affected the process by which both U.S and international standards are developed and maintained and has already resulted in changes in both U.S and international standards. According to the IASB chairman Sir David Tweedie, "IFRS are now used by 100 countries throughout the world. By 2012 we expect the accounting standards of major economies such as those of Japan, Canada, China, and India to converge with IFRS while at the same time differences between international standards and the U.S G.A.A.P are being eliminated." As part of the efforts to make the accounting profession run parallel with the globalization of the 21st century, the Financial Accounting Standard Board (FASB) in the U.S and the International Accounting Standard Board (IASB) jointly issued a memorandum of understanding known as the "Norwalk Agreement" in October 2002 to mark a significant step toward formalizing their commitment to the convergence of U.S and International Accounting Standards. As result of this the FASB undertook several key initiatives to further the goal of convergence of U.S G.A.A.P. with IFRS. For example, the FASB pronouncement has updated rules concerning inventory cost, exchange of non-monetary assets, and accounting changes and error corrections primarily to achieve convergence with IASB standards. David Illingworth (The Vice President of the Institute of Chartered Accountants, England and Wales), in a speech entitled, "Accounting Profession and Globalization" suggested that the accounting profession can fit into the globalization of the 21st century by accepting the need for global standards in its work. This he said was the reason why the ICA (England and Wales) work through the International Federation of Accountants (IFA) to ensure that all accountants and auditors in the world subscribe to a global code of ethics. Bruce Pounder concluded that, the accounting profession can fit into the recent globalization by enhancing the knowledge, skills, and abilities, and credentials of its members. Life-long learning is not merely desirable. It is essential for career success in an increasingly globalize world. Globally-recognised credentials like the Association of Chartered Certified Accountants (ACCA), Certified Management Accountants (CMA), and Certified Internal Auditors (CIA) can make complements to localized credentials. Graham Ward (President of the IFA) states "we firmly believe that it is the public's interest to have a single set of international standards, of the highest quality, set in the public interest by an international expert body which transparently consults with, and recognises the legitimate interests of, the international community". The key assumption in the above statement is that universal acceptance of a single set of high quality standards would make the global market more efficient by enhancing consistency and comparability of financial statements. In conclusion, as businesses become increasingly globalize, there is clearly more pressure on accounting profession to expand and enhance the knowledge, skill, and abilities of its members beyond what they are currently likely to possess in order to fit well into the globalization of the 21st century. ALBERT TACHIE E-MAIL: firstname.lastname@example.org TEL: +233 243 860 333
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