ACCOUNTING STANDARD SETTING

Accounting Standard Setting

Accounting Standard Setting

Introduction

As the world is moving towards globalization where the concept of free market has its own importance leads to the setting of Accounting Standards, as to provide standardize form of financial information of any economy or company. The purpose is to turn the whole world into one market, which generated the need for accounting standards setting. Though there are various accounting standards being practiced all over the world especially one is related to European practices and other is to American practices, however there are fourteen generally accepted accounting principles (GAAP) that is followed everywhere. (Deegan, 2000) These 14 standards are mandatory to understand as this would ultimately help in understanding the process involve in setting of these standards. However, free market remains the major factor of setting accounting standards because in a free market investors from all over the world invest their capital and in turn they required to get profit, and in order to judge which area is best for investment a financial or an accounting report would be proven helpful, thus this increased the need of the setting internationally accepted accounting standards. The 14 GAAP adopted by the VII Inter-American Accounting Conference and the VII National Assembly of graduates in economics held in Mar del Plata in 1965, set out as follows:

Equity

Equity between competing interests must be a constant concern in the accounts, since those who use or consume data items can be found at the fact that their interests are in conflict. It follows that the financial statements should be prepared so as to reflect fairly, the various interests at stake in a farm or individual enterprise. (Gavin, 2003)

Body

The financial statements always refer to an entity where the subjective element or owner is considered as a third party. The concept of "entity" is different from "person" as one person can produce financial statements of several "bodies" of their property. (SAC, 2001)

Economic Assets

The financial statements always refer to economic assets, i.e. tangible and intangible assets that have economic value and therefore likely to be valued in monetary terms.

Base Currency

The financial statements reflect the assets by a resource that is used to reduce all components to a heterogeneous group and expression that allows easy comparison. This resource is to choose an accounting currency and value the assets using a "price" to each unit.

Generally used as money of account money is legal tender in the country in which does the "body" and in this case the "price" is given in units of legal tender money.

In cases where the currency does not constitute a stable pattern of value, because of the fluctuations that experience, not impair the validity of the principle underlying it, because the correction is feasible through the application of appropriate adjustment.

Existing Business

Unless expressly stated otherwise means that the financial statements are in a "going concern", considering that the concept that informs the above expression refers to the entire economic body whose personal life is in full force and ...