Question

The development of accounting standards is a challenge and requires concerted efforts between different parties to successfully enforce it. If you were given full authority in this matter, would you suggest that GAAP should be developed and implemented? What procedures will you take to protect all affected parties?

Answer 1

Account Standards [ The Process to Simplify ]

Introduction

In the real case scenario it is very important to understand the real essence and significance of an accounting standard in the society, as these standards become the backbone of every disclosure made to the concerned parties. As the standards differ in quite a few segments over the geography dynamics, which means that in different regions there are different standards being applicable for preparation and presentation of financial statements along with the treatment of varied transactions. But now the world is becoming really a small place to live in and as for that, IFRS is gradually being applied to the various parts of the world, because in today's world the Enterprises are not restricted to the geographical boundaries of any country.

Perspective and the Procedure

Now, definetly a yes for the question asking whether to implement the GAAP or not. Because it is really a very important tool for the clear and concise standardised format of treatments and presentation over the country. The stakeholders of the enterprise play a very important role in the pushing the economy and making suitable decisions for the growth of the company, hence they would be in a position to make such decisions only when they are produced with appropriate accounting outputs, and when I say appropriate accounting outputs, it would be nothing but the treatments of various accounting transactions with a standardised approach along with the precise disclosure format. So, yes the GAAP implementation is the primary step for the growth of any economy.

Process for development:

1. Need for Standards: Every innovation is because of the underlying need, and so in the case of Accounting standards to there is a need by the stake holders for the gerneralised understanding and presentation of the Financial statements and hence a standardised view would give them the required knowledge to judge the performance better.

2. Managements treatment: Every enterprise has a unique management and in turn the management decides the treatment for a particular transaction, hence the need for the management of all the enterprises to treat in a similar format becomes of utmost priority. So after considering the need for development the appropriate standard would be legit only when various proposition of treatments are received from various enterprises and then the best treatment is selected upon.

3. Goverment policy: The government policy plays a significant role in the development of these standards as the governments ules and regulations should be abided by the enterprise so the standard cannot be in argument of government policy and rules.

4. Clarity to General Pulic: As the people not being engaged in the day to day operations of the enterprise but still are the stakeholders of the same as they hold investments in that enterprise, require a standardised view over the understanding of the financial stamanets too. As for example if two enterprises have different account presentation, the general public might get misguided by such treatments.

5. Reference to old standards: The very base of creation of the of a new standard is the taking th learning from the old practice and considering on solving the barricades of the old practice.

Conclusion

The above explanations define cleary the need for the setup of the accounting standards in a society and also ensuring the appropriate implementations of them as not only the enterprise gets impacted but as well as the entire economy is guided by such standards. Hence a carefully planned steps and also taking care of the implementation techniques will lead to a successful completion of stardisation over the accounting segment.