Too Many Accounting Regulations - Essay Example

Accounting Standards There is too much Accounting Regulations Accounting standards are those rules that stipulate the manner in which book of accounts should be prepared including certain features that are prescribed for that particular standard. Accounting standards are different geographically, this is to the extent that a country or a continental region can agree on what accounting method that should be used and it becomes binding. The reason for which the accounting principles are standardized is to provide a predictable and consistent way in which accounts are managed.1 It should be remembered that sound accounting systems are able to satisfy the interest of the investors and is helpful in enabling them make informed choices based on the comparable information relayed by reports that conforms to the accounting standards. The accounting standards are legally recognized in a country and companies that have shown interest to do business in any country must abide by the standards prescribed.2 Given that each country can prescribe their own accounting standards, there has been mushrooming of these standards that it becomes difficult to know which one is good for one. The reason for the emergence of many standards is that the different countries have peculiar political, economic, and constitutional orientation that defines what will work for them. Accounting standards for that matter have tremendously increased in number and it has become difficult to rely on any of the many standards considered by countries. 3The many interested parties on the content of the books of account has contributed to the emergence of these standards not for any other reason but to cushion them against possible financial loss or to operate under disguise-it remains impossible to know whether the company is making profit or losses and that investing in the company is a wise decision. Based on the many accounting standards, the rapidly growing globalization of the corporations and matters of finances has necessitated the need for harmonized and rationalize standards that contain all the necessary information for the purposes uniformity. These standardized versions are regionally considered specifically by the countries that have agreed to come together for the purposes of bringing sanity in the crowded and competing standards.4 At the global perspective, it is easier to give a comparative approach to companies that operates in different countries using the rationalize standard. The move towards harmonization of these standards has seen emergence of international bodies like International Accounting Standards Board (IASB).5 IASB has managed to render some of the standards used by countries irrelevancy by recognizing bodies like International Accounting Standards (IASs) and International Financial Reporting Standards (IFRSs) which subsequently have been embraced countries like the European Union, South Africa, Australia, Russia, and Hong Kong. 6 This convergence acceptance of the accounting standards has gained popularity with many countries appreciating the need and signing in as members who endorse the system. A typical point in case is the decision by US to conform their US Financial Accounting Standards Board (FASB) to that of IASB.7 The trend will make countries accept only a few of standards that exist and reduce drastically the number of approaches available now. Having said that the accounting standards are too much for no reason, it is now reasonable to account for the reason that makes these accounting standards to be rationalized as said. It will be realized that accountability, good governance, and transparency are the recipe for economic growth and improvement of the vicious poverty and conflicts in nations. This phenomenon is common in countries that have their economy based on the availability of the natural resources. These convergent standards create a conduit through which much needed information will be availed to the public for scrutiny. They will be having the opportunity to put their government or any other necessary organization to task by asking questions where necessary. Questions based on the financial reports like which agreement are made and by between who, and making of payments have been made to who. These are pertinent questions that need to be known by either the people or the investors. The citizens alone will not gain from this move, other key places in issues of finances and economy will equally gain, these groups include investors. With the precision occasioned by these standards, the investors are also able to obtain information that is pertinent to them in making informed choices.8 They will be able to evaluate and calculate the level of risk involved in doing business in specific areas based on the financial reports available. The international financial institutions also stand a chance of gaining special information that otherwise would have remained in the confines of companies.9 The companies as the main target group here will also benefit from the improved status of transparency in the sense that they will be operating in an environment that is devoid of mistrust and bad governance. The need to reduce the accounting standards by convergence of their requirements has made it possible for the companies to be engaging in a levelled playground with no one unduly disadvantaged. The standards have also led to the absolute protection of the companies that abide to the ethics form the unjust ‘under cuts’ occasioned by the unscrupulous ones. In conclusion, the importance of a valid financial report in a business context cannot be overstated. Manipulation of the report or using standards that are interested in cushioning a few individual is not only disastrous to the company or the organization, but also to those with a keen interest in the company. It should also be noted that many stakeholders have interest in the designing of accounting standards and that explains the crowded field with standards tailored for specific reasons only. Most of the standards that are not internationally accepted are skewed in their outcome and do not give a true reflection of the organization’s status. The internationally accepted standards should be embraced by all the countries to allow for a uniform tool of assessment in this game, as this will contribute to fair competition of companies without favour based on a flawed system. Bibliography Godfrey, Jayne M., and Keryn Chalmers. Globalisation of accounting standards. Cheltenham, UK: Edward Elgar, 2007. Greuning, Hennie van, and Marius Koen. International accounting standards: a practical guide. 2nd ed. Washington, DC: World Bank, 2005. Oppermann, H. R. B. Accounting standards in brief. Lansdowne [South Africa: Juta, 2008. Oppermann, H. R. B. Accounting standards. 13th ed. Lansdowne: Juta, 2009. Rayman, Anthony. Accounting standards: true or false?. London: Routledge, 2006. Read More