STANDARD SETTING IN ACCOUNTING

Approaches to Standard Setting in Accounting

Approaches to Standard Setting in Accounting

Introduction

The study is related to the approaches to standard setting in accounting and that their success is contingent upon one important dynamic that, as of yet, has not been effectively addressed. The aspect in question is approaches to standard setting in accounting and their role in the financial reporting process. Corporate management is principally accountable for the financial reporting of their individual companies. This dynamic can put the interests of those who prepare the financial information at odds with its users. For case in point, an executive's bonus, stock options, or even continued employment may be tied to what's depicted in the financial statements. Accordingly and as a consequence, this dynamic creates incentives for management to distort financial portraits or in many cases, commit accounting fraud. In response, standard setters are forced to draft accounting standards in a defensive manner to reign-in such executives and their aggressive practices. For many years, the accounting standard setters have been waging a combat in opposition to the financial fraud, distorted and obfuscated financial reporting. However, the accounting standard setters have been steadily losing ground as accounting fraud and obfuscated financial reporting continues to proliferate the public company landscape.

The ongoing battle between financial information prepares and regulators has resulted in an accounting and financial reporting regime that is fragmented, overly complex and allows for accounting results that are devoid of economic substance. Poor financial reporting has been deemed to be of such significance, that the Securities and Exchange Commission has formed a committee which advises as the purpose is to decrease the complexity in the financial reporting system and to make it more user friendly. This study that is approaches to standard setting in accounting contends that such as the reason for the complicated and complex accounting standards that regulators are attempting to reform. The study proposes an idea that will take away this tension between financial information prepares and those that regulate them. The objective here is to implore those involved in this process to take an outside the box approach to accounting standard setting and financial reporting.

The study that is approaches to standard setting in accounting advocates for a unique and unexplored paradigm shift in the accounting and financial reporting arena. Here the case is made for doing away with stock options altogether, and advocates for implementing incentives for accurate financial reporting in its place.

Approaches to Standard Setting In Accounting

The objective of approaches to standard setting in accounting is to realign the interests of executives with accurate financial reporting by providing incentives for such behavior. If the true goal in financial reporting is to overhaul the process and make it more user friendly, such an overhaul requires unconventional means to be successful. This paper builds a case for and explores one such outside the box approach.

An important step in the standard setting in accounting is the development of new and refinement of the old regulations on accounting ...