Common Accounting Standards around the World

Elise Williams

2024-04-08 10:51:52 • Filed to: Software for Accounting • Proven solutions

Businesses need to perform accounting so as to understand their financial position. To accomplish this, they rely on specific practices and principles. These are essentially concepts which guide the execution of the accounting procedure. There are different accounting standards guiding this activity around the world. Various countries and regions have differing ways of recording and auditing business transactions. The differences occur in processes such as the principles of consolidation, strategies of handling depreciation, deferment of taxes as well as adjustment for inflation.

There are also different ways of accounting reporting practices. Some examples of reporting activity which differs from one country to another include management discussion, statements of cash flow as well as footnoting. The differing methods often cause problems in processes such as interpretation of reports in companies that span multiple countries. In addition to that, the differences in accounting practices also cause problems in the valuation of businesses that have real estate in multiple nations. As a solution, accounting standards are used to harmonize regional bookkeeping. Here is more about accounting standards and some examples of these in different places across the globe.

What are Accounting Standards

Accounting standards can be described as specific rules and regulations which create common procedures in accounting practices. These standards set in place general regulations that are used in the preparation of financial statements by businesses in a specific country or region. Doing so prevents the emergence of misunderstandings between the accountants during the processes of auditing or assessment of financial reports. In general, accounting standards create foundational principles which guide the responsibility of the bookkeeping performed by organizations and companies today.

Accounting Standards Used Today

There are various types of accounting standards which are utilized today. They guide the activity of creating financial reports. Here are some of them.

The Generally Accepted Accounting Principles (GAAPs)

These are conventions, rules and procedures which are used to govern accounting practices in the United States. They were created by institute of American accountants for the purpose of streamlining bookkeeping activities in the country through a unifying style of financial accounting. In 1973, the financial accounting standards board (FASB) was given the responsibility of accounting standards codification across the nation. They perform regular accounting standards update as well as many other activities to maintain these regulations.

These standards were supported by all financial bodies in the US and are even used as a yardstick for companies that wish to expand their influence or utilize specialized funding mechanisms. For example, the Securities and Exchange Commission (SEC) enforces a rule whereby all companies that want to be listed on the New York Stock Exchange must adhere to the GAAPs in preparing their financial statements.

The main objective of the GAAPs is to ensure that the financial statements of various companies can be understood and compared. As a result of all business entities following the same rules of bookkeeping, the financial statements of these companies become credible and reliable. In addition to that, they allow business decisions to be made based on information that is accurate and consistent. Since the development and implementation of the GAAPs in the United States, other countries borrowed the regulations and adjusted them to fit their economic environments. As a result, countries such as Canada and Australia have their own GAAPs guiding accounting in their jurisdictions.

International Financial Reporting Standards (IFRS)

These are some accounting standards which are used in countries around the globe other than the US. Known as the International Financial Reporting Standards (IFRS), they set general, shared regulations of accounting across multiple countries and regions. The IFRS were created by the International Accounting Standards Board (IASB). This is an independent organization whose main objective is to set standards for accounting. The organization is based in London, England.

These international accounting standards are specially made for multinational corporations. In addition to creating and enforcing them, this organization also interprets the accounting standards that are used in various countries during the preparation of financial statements. While there are countries that have adopted and adapted the GAAPs for use in their economic environment, there is a gradual, collective move towards the IFRS by many countries around the world. This is for the purpose of developing a cohesive, cooperative environment for the creation and comparison of financial statements between companies and other stakeholders.

FreshBooks - Software for Different Accounting Standards

Thanks to Information Technology (IT), we can now perform financial accounting much faster and more accurately. FreshBooks is a Cloud-based software solution which can assist you to perform financial accounting. It contains a collection of built-in tools. By using these resources, accountants can track accounting periods, handle invoices, capture payments made through credit cards, store receipts and track expenses too.

The software follows the accepted accounting standards. Therefore, it can produce financial statements that are current, comparable and accurate. You can enjoy the capabilities of this tool for free over a period of 30 days. After that, you have to purchase it in case you would like to continue using it Overall, FreshBooks is an excellent investment that can usher small businesses into the 21st century.

Accounting is one of the most important activities that a business must perform. It allows the owners, shareholders, staff and regulatory bodies to get a comprehensive view of the business' financial state. Today, financial reports are created according to the accounting standards applied in various countries. Furthermore, the process can be hastened and streamlined using software solutions such as FreshBooks.

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