Approaches to Standard Setting in Accounting Essay - 1

Approaches to Standard Setting in Accounting - Essay Example Financial statements are prepared and presented through observation of relevant accounting standards and procedures. Users of these statements, therefore, need to derive assessments that are realistic in regard to any given entity’s financial status. These users are spread across the economic context, based on the interest of each of them in the financial positions of different entities. To act in the satisfaction of these stakeholders, accounting standards are crucial in ensuring that financial reporting is effective enough. In this regard, capital markets operations are assessed for their efficacy in the context of accounting standards integration. The impacts of accounting standards on different entities can take more than one way. The impacts can be individual-entity-based or even broader to encompass several sectors of the economy or the entire economy at large, including capital and other markets. On a smaller scale, accounting standards enhance individual entity account ability and further provide strong basis upon which investors, creditors and other stakeholders are managed. In general, corporate governance is improved prior to business arrangements of different entities. ... Literature Review McLeay and Merkl (2004, p.341) notes that accounting standards operate by setting out general rules to be followed in financial statements’ preparation and financial reporting. These rules are practical prior to the accounting work in question. Entities differ in financial reporting methods through similar or close accounting standards are observed. This is due to the fact that there are a number of setters of accounting standards around the world. According to Bennett & Loucks (2008, p.407-419), major accounting standard setting bodies around the world include: Basel Committee on Banking Supervision (BCBS), Committee on the Global Financial Systems (CGFS), Committee on Payment and Settlement System (CPSS), Financial Action Task Force on Money Laundering (FATF), Financial Accounting Standards Board (FASB), Financial Stability Board (FSB), International Association of Deposit Insurers (IADI), International Association of Insurance Supervisors (IAIS), Internati onal Accounting Standards Board (IASB), International Monetary Board (IMF), World Bank (WB), among others. In the UK, GAAP is responsible for setting accounting standards and regulating observance of company law. Accounting standards have three basic concepts that they account for. The first concept is to present the underlying problem. In this case, an intensive description of the underlying problem is presented. Upon the realization of a problem, there is the need to get a solution to the problem. The second concept is therefore that of fixing the problem highlighted in the first concept. Fundamental accounting theory is explored in pursuit of finding a viable solution to the