Accountants have to maintain their accounts in the fear of threats of stern actions. 4. Development. ADVERTISEMENTS: Let us make an in-depth study of Accounting Standards. Littleton defines standard as follows: “A standard is an agreed upon criteria of what is proper practice in a given situation; a basis for comparison and judgment; a point of departure when variation is justifiable by the circumstances and reported as such. They basically are a report card for the company. After reading this article you will learn about: 1. Accounting standards act as guidelines and handy rules for the conduct of accounting work. With the implementation of accounting guidelines on a national scale, countries are able to implement a common terminology in the economic world and perform a precise, uniform, objective and correct calculation of data on the financial position and results of business units. The merits of standards can be studied as under: 1. Accounting Standards deal with mainly financial measurements and disclosures and can be considered as technical response to calls for better financial accounting and reporting. > … It may also be stated that accounting is the language of […] Objectives and Features 4. Accounting standards are also helpful in development of a logical conceptual framework and structure for measurement of information, objectives of financial reporting. Accounting standards dominate the work of accountants. The Internatio… Standards are there to help accountants to apply those accounting practices regarded as the most suitable for the situations covered. Accounting professionals, like accountants and auditors have to perform their work in changing environment of legal bindings. “Standards” in accounting literature used to be generally known as principles a few years back. An accounting standard should significantly reduce the amount of manipulation of the reported accounting numbers that is likely to occur in the absence of the standard. Privacy Policy 8. They are not accidental but intentional in origin: they are expected to be expressive of the deliberately chosen policies of the highest types of businessmen and the most experienced accountants. Another way to prevent getting this page in the future is to use Privacy Pass. What is the definition of accounting standards?These rules have an impact both on a national economy and on the economic and fiscal policy. Determining Managerial and Corporate Accountability: Standards also facilitate in determining corporate and managerial accountability. Accounting Standards help in achieving Uniformity in accounting practices. Performance & security by Cloudflare, Please complete the security check to access. The credit goes to English people in England who introduced the term ‘standard’ by setting up their Accounting Steering Committee at the end of 1969 in place of ‘principles’. Accounting standard’s need to be implemented in their accounting process by every company. Accounting standards comprise the scope of accounting by defining certain terms, presenting the accounting issues, specifying standards, explaining numerous disclosures and implementation date. Standards ensure consistency and comparability in place of uniformity in financial reporting. However in America the term was used and became popular after establishment of FASB in 1973 where as in India the term became popular with formation of ASB by ICAI in 1977. Prohibited Content 3. Copyright 10. Accounting practices have created. Your IP: 207.246.86.230 They direct a high but attainable level of performance, without precluding justifiable departures and variations in the procedures employed”. Need of Accounting Standards 3. Accounting standards are not optional to be followed by companies. These standards are being changed, added and deleted with passage of time. Concept of Accounting Standards 2. Standards protect the users of financial statements by providing them financial information in which they can have confidence. Standards Improve Reliability of Financial Statements: Reliability of financial statements depends upon reliable accounting data. Through a provision in company law, these standards are made mandatory for companies. Management always concentrate on choice of best alternative for performing any activity, standards act as best choice available to them. Any accounting standard usually consists three parts.