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Question: What might explain the fact that different accounting standard-setters have developed accounting standards that are sometimes quite different in nature?

Short Answer

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Answer

The standards presented by the concern are sometimes tax-oriented, rules and principles-based as well as business-oriented. It means that they usually vary in objectives and concepts.

Step by step solution

01

Definition of Accounting Standards

An accounting standard refers to a document issued by a regulatory body, indicating the way in which the accounting transactions are listed and reported. The concern that usually presents accounting standards is the International Accounting Standards Board (IASB) as well as the Financial Accounting Standards Board (FASB).

02

Fact that explains that accounting standards are sometimes quite different in nature.

Different accounting standard-setters have developed accounting standards that vary in nature. Accounting standards are formulated to ensure that there is conformity in financial reporting and regularity in the data that is issued by the firm. However, the way of presentation of financial statements is mostly dependent on the country’s local and statutory requirements. In some countries, accounting standards have been set basically in accordance with the needs of the private creditors, while in other countries the tax authorities or central planners have been implemented by International Financial Reporting Standards (IFRS).

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Most popular questions from this chapter

What are some of the major challenges facing the accounting profession?

What is Rule 203 of the Code of Professional Conduct?

The following comments were made at an Annual Conference of the Financial Executives Institutes (FEI). There is an irreversible movement toward the harmonization of financial reporting throughout the world. The international capital markets require an end to:

  1. The confusion caused by international companies announcing different results depending on the set of accounting standards applied.
  2. Companies in some countries obtaining unfair commercial advantages from the use of particular national accounting standards.
  3. The complications in negotiating commercial arrangements for international joint ventures caused by different accounting requirements.
  4. The inefficiency of international companies having to understand and use a myriad of different accounting standards depending on the countries in which they operate and the countries in which they raise capital and debt. Executive talent is wasted on keeping up to date with numerous sets of accounting standards and the never-ending changes to them.
  5. The inefficiency of investment managers, bankers, and financial analysts as they seek to compare financial reporting drawn up in accordance with different sets of accounting standards.

Instructions

  1. What is the International Accounting Standards Board?
  2. What stakeholders might benefit from the use of International Accounting Standards?
  3. What do you believe are some of the major obstacles to convergence?

Question: Economic consequences of accounting standard-setting means:

(a) standard-setters must give first priority to ensuring that companies do not suffer any adverse effect as a result of a new standard.

(b) standard-setters must ensure that no new costs are incurred when a new standard is issued.

(c) the objective of financial reporting should be politically motivated to ensure acceptance by the general public.

(d) accounting standards can have detrimental impacts on the wealth levels of the providers of financial information

Distinguish between FASB Accounting Standards Updates and FASB Statements of Financial Accounting Concepts.

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