Definition

Accounting Standards or financial reporting standards are the standards, established and improved by the responsible bodies, enforceable by authorities, to provide consistency and comparability in preparation of Financial Statements.

Responsible Bodies

Financial Reporting Standards are issued by Standards Issuing Bodies, Such as IASB and FASB. These Bodies have Standard Setting Process and Framework for the Review of existing Standards and Development of future Standards.

Enforcement Agencies

Although Accounting Standards are not of a mandatory nature but, some authorities such as IOSCO regulate proper implementation of Accounting Standards.

Consistency

Accounting systems and standards should be applied consistently so that the user of the Financial Statements can compare the Financial Performance of the entity over time.

Comparability

The financial Statements should be prepared in such a manner that the users of the financial statement can compare the financial Performance of companies operating in domestic country and companies operating in any foreign country.

Major Financial Reporting Standards

International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) are the most widely used Financial Reporting Standards.

International Financial Reporting Standards

IFRS are issued by International Accounting Standards Board (IASB) which is an independent Accounting Standards Setter body, having head office located in London, United Kingdom. Until September 2013, Thirteen (13) IFRS are issued by IASB.

International Accounting Standards

IAS’s is the previous name for Accounting Standards issued by IASB, from 2001 the name of Standards issued by IASB are IFRS. Up to 2001, Forty one (41) IAS’s were issued.

Generally Accepted Accounting Principles

Refer to the standard framework and guidelines for Financial Reporting Used in any given jurisdiction. These include the standards, conventions, and rules that accountants follow in the preparation of Financial Statements. In fact GAAP is the local accounting standards which every country has developed over time to regulate its local Financial Reporting. Therefore there are many GAAP’s present in the world. Some of the GAAP are.

Generally Accepted Accounting Principles (United States)
Generally Accepted Accounting Principles (United Kingdom)
Generally Accepted Accounting Principles (Canada)
Generally Accepted Accounting Principles (France)

Benefits of Financial Reporting Standards

Adoption of Financial Reporting Standards ensures that the Financial Statements of different entities are prepared on the same basis; this aid in comparing the Financial Statements of different entities.

Global Trend to Adopt IFRS

Due to Globalization, international Trade and Investment across borders, there is a leading trend in countries to adopt IFRS. Major economies of the world like USA, are working on international harmonization projects to shift its Financial Reporting Framework from GAAP to IFRS. There are more than 115 countries that are using IFRS in their Financial Reporting and the trend is increasing.

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