Accounting Standards For The Companies †MyAssignmenthelp.com

Question: Discuss about the Accounting Standards For The Companies. Answer: Introduction The conceptual framework of financial reporting has been designed to provide a basis to the individuals for the formation of their accounts and financial statements that it is true and showcases the correct details about the company and its affairs. It aims in encompassing the major theoretical and conceptual issues that are surrounding the financial reporting and help in forming a strong base on which the accounting standards can be based(Goldmann, 2016). These frameworks were in the starting found to be very helpful as they provided the necessary accounting standards and guidance for formation of the financial statements. These frameworks aim to provide consistency in the accounts of the companies around the world so that it is easy for the people to make the necessary comparison between these companies. But the main point to be discussed in this report how successful has been these frameworks in providing proper guidance to the companies and whether they are mere rules that the co mpanies around the world has to follow(Fay Negangard, 2017). The main analysis will be done on the success rate of these reporting standards in making sure that the accounts of the company are prepared in such a manner that they end up showcasing the true and fair view of the company and its accounts. It will also be seen whether these statements were able to bring in a radical change in the world scenario as has been contemplated. Analysis In the past there were accounting standards that governed the scenario of accounting for the companies and there were a lot of difficulties that were associated with the same, this led to the need to a more principle based framework that will help the companies in achieving better results. The main issues that were faced were- There was lack of consistency between the accounting standards that rendered lot of difficulty especially in the concept of prudence versus materiality. There were also internally inconsistent as the effect of the standards on the transactions of the financial position of the company was considered more important then its overall effect on the financial statements of the company. There were not defined on the policy of providing the best policy for the companies but were often defined on the principle of fire fighting approach in case there is any situation of corporate failure or scandal. The problems were considered after they occurred to provide the best solution to the companies. These standard setting bodies were often very biased in their approach and that influenced their overall decision in this field(Goldmann, 2016). There were many successive standards in which the same theoretical issue was discussed again and again and that led to a large amount of confusion and problem. It was also stated that in lack of a conceptual framework for accounting it led to proliferation of the rule based system of accounting that made the entire process very inflexible and often the changes were not based on internal analysis and led the entire scenario very cryptic. The introduction of the conceptual framework promised a more principle based approach where the accounting standards were developed based on more conceptual analysis and hence was flexible as per the situation that the companies were facing(Mayntz, 2017). The main purpose of the financial conceptual framework was To help in the development of the future IFRS and help in reviewing the present standards on the basis of conceptual analysis. To help in harmonization of the accounting standards and regulation by removing the inconsistencies those are present within. To help those who are responsible for formation of these standards in cases that includes dealing with accounting situation for which there is no accounting standard as of now. The framework is also very valuable for the auditors and the other professionals and helps them in making an opinion on the financial reports of the company. The main content of this financial framework includes the following To understand the main objective of the financial statements. The main objective of the reporting entity is also taken into consideration. The main parties that will use these financial statements should be indentified and their opinions must be taken into consideration(Das, 2017) The previous accounting standards that dealt with assets liabilities, income and expenses should also be considered by the companies and proper opinion must be developed on the same that will eventually help the bodies in formation of these standards. The main advantages of designing these accounting conceptual framework of reporting includes There are of very high quality and are widely accepted all over the world and hence helps in maintaining consistency between the accounting concepts and principles of the companies around the world(Tysiac, 2017). They have been developed by highly professional people with the aim of global convergence and providing a better outlook and approach. The companies will have better status in case they apply the IFRS for preparation of their accounts and get their accounts audited accordingly. In case the companies are having foreign subsidiaries in that case these companies will have less difficult in maintain consistency between the companies as they will be based on the same accounting principles. It helps in easy comparability between various companies around the world and the companies that are operating in the same filed. This will help the users of the financial statements and help them in taking important decisions accordingly for future prospects. Thus we see that in general the internal reporting framework is having a lot of advantages and is very helpful for all the parties that are related to the companies around the world. But it is not as what is seen there are certain loopholes in this highly designed secured structure of reporting that often goes unreported. As per reports it has been stated that the framework has not been successful in providing solutions to all the problems that the companies are facing and has been a failure in many ways(Gartland, 2017). It has also been said that it has led to unnecessary increase in reporting of large amount of liabilities by the company and has also quashed any kind of innovation or changes that the companies might want to bring. It has also failed to bring in a radical change as it has promised through its framework. The main areas where it has been quite disappointing are- It is extremely difficult to set up, it requires a large amount of analyses to reach to a conclusion. Large amount of time and energy is wasted in the same that affects the formation of these accounting standards(kabir, et al., 2017). It is also very expensive to imply the same after it is formed. It requires providing large amount of training to the professionals to understand these accounting standards and also the users who are dependent on the financial statements to take important decisions regarding their accounts finds it difficult to read the same and analyze it accordingly. The conceptual framework is very rigid. This is one of its major disadvantages that rules out any possibility of any new changes or innovations that the companies might want to bring. They are based on a particular guideline and the companies around the world are asked to follow the same accordingly no matter whatever is the situation. There are large amount of conflicts between the previously set accounting principles and the new conceptual framework. This leads to a large amount of confusion, companies find it difficult to deal with it accordingly and reach to a conclusion(Mayntz, 2017). The conceptual framework may be useful for only some users and other may not find it that beneficial. The language used is very difficult and therefore it is not easy for the users to understand the same and apply the same accordingly in their financial statements. The users are dependent on these statements to take important decisions regarding the company and thus they are highly dependent on these conceptual frameworks to show case the true state of affairs of the company. It is also stated that these framework has often led to reporting of large amount of liabilities by the companies and the firm and thus causes a lot of difficulty for the companies to follow the same. It renders itself useless in cases there are some peculiar situations based on accounting on which there is no framework established beforehand(Laursen Thorlund, 2016). It has also failed in ascertaining consistency in the accounting principles and standards around the companies of the world, as not most of the company find it easy to apply these principles in developing or poor countries. Hence the global consistency that the framework wanted to achieve has not been possible till now. This is a major failure for the framework because the companies are facing so many issues in applying the same accounting principles in their financial statements. The companies are thus not able to produce reports on the basis of the conceptual framework due to which there are issues in comparing the statements of the companies around the world. Thus the main aim of comparability that will help in solving the issue of comparing the accounting statements of the company rendering them useful for the companies in the global world scenario is not met. Thus we see that there are many aspects in which the accounting standards have failed to provide a much needed global awakening to the companies in the context of applying these accounting principles and standards that has been set up after a lot of contemplation and research. So the main aspects that the rules framing bodies must consider is to set up such standards that will help in achieving a global consistency that are easy to understand and less complex. Conclusion Hence after analyzing the all over situation, it can be said that the international framework of reporting standards have failed in more than one scenario in providing the desired results that the companies wanted. However they are way better than the previous accounting standards that were there before and thus it is important that the companies around the world must try to inculcate these principles in the formation of their accounts so that it is easy for the users. Large number of companies around the globe has made it mandatory to follow these principles that the dream of achieving consistency in the accounting standards and accounting reports is not far behind. The best that can be accepted out of this conceptual framework is that It helps in making the current practices of accounting more better and legitimate. It should also see to it that the public sectors should not be given the control of framing the rules for the accounting bodies. It must also try to maintain the desire d economic and social status. All these will help in the long run in achievement of the long term goals that the conceptual framework bodies wants to achieve. It will help in making the overall concept of accounting standards and accounting policies easier to employ and understand. It should also try to take the necessary feedback from the related parties to understand to understand the difficulties that the users are facing and base their overall judgment on the basis of that. Thus all these will help in achievement of the global change that this framework of accounting wants to achieve that will make the overall scenario more favorable to the users and also make it more user friendly. References Das, P., 2017. Financing Pattern and Utilization of Fixed Assets - A Study. Asian Journal of Social Science Studies, 2(2), pp. 10-17. Fay, R. Negangard, E., 2017. Manual journal entry testing : Data analytics and the risk of fraud. Journal of Accounting Education, Volume 38, pp. 37-49. Gartland, D., 2017. The importance of audit planning. Journal Of Accountancy. Goldmann, K., 2016. Financial Liquidity and Profitability Management in Practice of Polish Business. Financial Environment and Business Development, Volume 4, pp. 103-112. kabir, H., Rahman, A. Su, L., 2017. The Association between Goodwill Impairment Loss and Goodwill Impairment Test-Related Disclosures in Australia. 8th Conference on Financial Markets and Corporate Governance (FMCG) 2017, pp. 1-32. Laursen, G. Thorlund, J., 2016. Business Analytics for Managers: Taking Business Intelligence Beyond Reporting. Second ed. CANADA: Wiley Publisher. Mayntz, R., 2017. Networked Governance. s.l.:Springer. Tysiac, K., 2017. Rulemaking gives auditors a chance to provide more insight. Journal of Accountancy.