As the world is becoming a global village, so is the business world. More companies are operating globally. The International Financial Reporting System has developed standards that ensure a transparent, efficient and accountable financial market worldwide. You can read international standards on accounting and finance here http://www.ifrs.org/. All countries have their own set of rules and standards for accounting and financial reporting. And it is essential to know them.
For a corporation that has gone global, it is a must to follow these accounting standards. These standards are guidelines and procedures for accounting in private or government bodies. Developing these standards ensures that accounting information is uniform and that accounting decisions are made reasonably.
The principal role of the accounting standards is to bring universality to financial records and bookkeeping. Government organizations, private corporations, and every other accounting body must follow the same accounting procedure. Following a uniform process in accounting, you can make all comparisons among the financial status of similar bodies. The financial position of a government organization can easily be compared with the economic work of a private organization with the same objectives.
Accounting standards are developed to ensure a transparent system in an organization. The principles and procedures of accounting are made with the purpose that information can be open to observers. Transparency and openness are particularly important in general plans, trusts, and government companies. Standards put a limit on organizations to use creative accounting to move items around.
Accounting standards give an insight into the most appropriate information in the most rational way. Companies that follow clear, uniform, and transparent accounting information attract more investors. Observers of such details can make sound decisions about a company. Standards limit organizations so that they cannot hide the financial status of a company from observers. Entrepreneurs can access adequate information related to accounting data and make better decisions jointly. Potential investors can study available accounting policies to decide if they will invest in a business or not.
The importance of accounting standards is that it makes the work of investors, taxpayers, auditors, and decision-makers easier and fairer across the board. You can make critical decisions for a company’s future more uniformly.
In public organizations, a uniformity in accounting standards makes it clear and easy for the taxpayers to see how their money is spent most rationally and suitably. Taxpayers are the public whose money is then collectively spent on societal welfare works. Regulatory authorities can easily keep a check to ensure that laws are being followed. Audit and inspections, both internal and external, allow auditors to work appropriately when accounting is done according to standards.
If a firm does not follow standard accounting procedures and practices, then it can be legally challenged. Especially in government or publicly traded companies, uniform, clear, transparent accounting data is crucial.
In business-oriented companies, financial statements that have followed accounting standards are credible and straightforward. These businesses can solidly grow, and potential investors have more trust in them. Bank loans and other subsidies are preferably given to companies when accounting standardization is in their business.
Types of accounting standards
Disclosure standards: There are a standard set of rules for disclosing accounting policies to external users.
Presentation standards: The accounting information comprising financial statements, cash flow charts, and balance sheets must be uniform as designated by the accounting standards for financial reporting.
Content standards: The contents in accounting data must be according to the standards set for the content data. No single entity should be missing from the contents of financial reporting.
If a company tries to go against these standards, it can face legal issues with its competitors or observers. In public or government organizations, the public is also the observer to challenge the organization. Fraudulent practices are challenging to get away from within the presence of accounting standards. Compliance with accounting standards is a chief principle of business.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.