Financial Accounting and Reporting

Financial Reporting Standards

Rules and guidelines that provide guidance to the accounting profession on how to report financial information accurately and reliably.

Importance to Key Players

Accounting standards allow accountants to provide information through financial statements that can be understood by management, board of directors, investors, and stakeholders. Well-designed accounting standards enhance investor confidence in the business.

Role in the Company

Accounting standards provide day-to-day guidance to accountants to ensure the steady operation of the business. Accountants must provide financial information that is relevant, reliable, neutral, and comparable by following accounting standards.

Comparability

The ability to compare financial statements is vital. Following accounting standards ensures businesses are playing by the same rules, making comparability easier. However, standards vary by country, which can lead to differences when comparing financial information.

Harmonization

The United States follows generally accepted accounting principles (U.S. GAAP), while over 120 countries use International Financial Reporting Standards (IFRS). The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) are working towards converging U.S. GAAP and IFRS to have one accounting standard used worldwide.

International Accounting Standards (IASs)

Standards issued by the International Accounting Standards Board (IASB) that provide guidance on financial reporting.

International Accounting Standards Board (IASB)

An independent, private-sector body that develops and approves International Financial Reporting Standards (IFRSs). It operates under the oversight of the IFRS Foundation and was formed in 2001 to replace the International Accounting Standards Committee (IASC).

The IASB's Conceptual Framework

The Conceptual Framework for Financial Reporting, developed by the IASB in collaboration with the FASB, replaced the 1989 Framework for the Preparation and Presentation of Financial Statements. It aims to harmonize all aspects of financial statements and address variations in practice across countries.