US ACCOUNTING STANDARDS

An in-Depth study of the accounting treatment of five accounting themes in the USA: with a Comparative between the USA and France

Accounting treatment of five accounting themes

Introduction

There are a lot of differences between the accounting standards of USA and the rest of the world. Especially, on the five major themes of accounting, i.e. inventory, foreign currency translation, lease, goodwill and intangible assets, and long-term contracts. In this assignment, we will make an in-depth study of the USA accounting standards and will make a comparison of the major themes of accounting with accounting standards of France.



Accounting standards in USA

The impact of legal factors in USA

The law system and legal factors of a country could furnish a much more significant impact on development of accounting standards and the implementation of these accounting standards as compared to other variables like the culture of a country. Countries like USA, which follow the common law' countries have very different accounting standards as compared to countries with code law like France. In the US, the legal system is different from the accounting standards; the legal system only guides the accounting standards in the country. There are a number of legal bodies in USA, which regulate the accounting standards in the country (Roberts, Weetman & Gordon 2008, 102).

The company law in USA and accounting regulations

The federal government of US is not involved in the process of the development of accounting standards in the country. They have a belief that the private sector of the country has far better resources and knowledge to develop the accounting standards. However, it makes a significant impact on the US companies because Securities and Exchange Commission (SEC) of U.S. has a requirement that every company has to follow the company law. Therefore, companies have to follow the accounting standards for either corporations or partnerships in their accounting process (Roberts, Weetman & Gordon 1998, 40).

Individual state laws and accounting standards in USA

The USA is a federation of individual states and every state in the USA has its own legislation body and its own individual body for setting accounting standards. The Governmental Accounting Standards Board (GASB) plays the role of determining the GAAP for every individual state. In the case of the federal government entities, the Federal Accounting Standards Advisory Board (FASAB) regulates the process of financial reporting. Every state keeps changing their laws to attract more and more business. However, in case of a conflict, the federal law would overrule the state law.

The role of SEC in USA

In US, the statutory authority of the development of GAAP standards has been enthroned in the Securities and Exchange Commission of US. The SEC has delegated the responsibility of the process of development and writing of different standards to the FASB and is retaining an oversight function.

The US Securities and Exchange Commission primarily regulate the capital markets in the country and have a mission to protect investor rights.

SEC and investor protection

To make sure that investor interests are safe, the SEC has ...