Generally accepted accounting principles
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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 straight forward. 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. 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

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. Massive ''accounting irregularities'' at large firms such as Worldcom and
Enron Enron Corporation was an American Energy development, energy, Commodity, commodities, and services company based in Houston, Texas. It was founded by Kenneth Lay in 1985 as a merger between Lay's Houston Natural Gas and InterNorth, both relativ ...
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 standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's fina ...
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

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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, covering over , making it the world ...
Generally Accepted Accounting Principles 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 th ...
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China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's List of countries and dependencies by population, most populous country, with a Population of China, population exceeding 1.4 billion, slig ...
Chinese Accounting Standards (''Zhōngguó qǐyè kuàijì zhǔnzé'' 中国企业会计准则) *
France France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of Overseas France, overseas regions and territories in the Americas and the Atlantic Ocean, Atlantic, Pacific Ocean, Pac ...
Generally Accepted Accounting Practice (''Plan Comptable Général'') *
Germany Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated between ...
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 ...
Indian Accounting Standards (Ind AS) *
Italy Italy ( it, Italia ), officially the Italian Republic, ) or the Republic of Italy, is a country in Southern Europe. It is located in the middle of the Mediterranean Sea, and its territory largely coincides with the Italy (geographical region) ...
Principi contabili nazionali * Luxembourg - Luxembourg Generally Accepted Accounting Principles (Lux GAAP) *
Nepal Nepal (; ne, :ne:नेपाल, नेपाल ), formerly the Federal Democratic Republic of Nepal ( ne, सङ्घीय लोकतान्त्रिक गणतन्त्र नेपाल ), is a landlocked country in S ...
Nepal Financial Reporting Standards *
Russia Russia (, , ), or the Russian Federation, is a List of transcontinental countries, transcontinental country spanning Eastern Europe and North Asia, Northern Asia. It is the List of countries and dependencies by area, largest country in the ...
Russian GAAP *
Sweden Sweden, formally the Kingdom of Sweden,The United Nations Group of Experts on Geographical Names states that the country's formal name is the Kingdom of SwedenUNGEGN World Geographical Names, Sweden./ref> is a Nordic countries, Nordic c ...
BAS (accounting) The Swedish BAS chart of accounts (Basic chart), represents the Swedish accounting generally accepted accounting principles (GAAP) and is an open to use chart of accounts for accounting in Sweden available in Swedish, English and German language t ...
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Switzerland ). Swiss law does not designate a ''capital'' as such, but the federal parliament and government are in Bern, while other federal institutions, such as the federal courts, are in other cities (Bellinzona, Lausanne, Luzern, Neuchâtel, St. Gall ...

Swiss GAAP FER (''Fachempfehlungen zur Rechnungslegung'')
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Turkey Turkey ( tr, Türkiye ), officially the Republic of Türkiye ( tr, Türkiye Cumhuriyeti, links=no ), is a transcontinental country located mainly on the Anatolia, Anatolian Peninsula in Western Asia, with a East Thrace, small portion on th ...
– 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 Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...
Generally Accepted Accounting Practice (UK) *
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., ...
Generally Accepted Accounting Principles (United States) 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 standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB). They constitute a standardised way of describing the company's fina ...
(IFRS) that were established and are maintained by the
International Accounting Standards Board The International Accounting Standards Board (IASB) is the independent accounting standard-setting body of the IFRS Foundation. The IASB was founded on April 1, 2001, as the successor to the International Accounting Standards Committee (IASC). It ...
. 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., ...
, 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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Constant item purchasing power accounting Constant purchasing power accounting (CPPA) is an accounting model that is an alternative to model historical cost accounting under high inflation and hyper-inflationary environments. It has been approved for use by the International Accounting St ...
* Convention of consistency * Philosophy of accounting * Statutory accounting principles for insurance companies in the US


References


Further reading

* Meeks, Geoff, 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