Importance of Uniform Accounting Standards
Accounting is a self-regulated industry across the world. However, there are certain accounting standards which describe the parameters and rules established by the Accounting Standards Board. These include specific approaches, principles and methods of accounting. Such standards are aimed at making accounting procedures more transparent and convenient.
There are three main kinds of reporting entities, including non-publicly accountable enterprises, not-for-profit organizations and publicly accountable enterprises. Different strategies as well as accounting standards have been formulated for different kind of entities. The standards addresses to the wide-ranging requirements of different organizations.
The public accounting standards help in providing information to the lenders and investors. This enables quick decision-making in matters related to investments and loans. Moreover, they also provide information about finances, funds and resources. Besides this, the lenders and investors are enabled to assess the feasibility of a loan or an investment.
Irrespective of the country in which the accounting standards are followed, the underlying assumptions and principles are similar across the world. Apart from this, the standards facilitate in making comparison between reports of different organizations in the same industry. Consistency in accounting standards allows consistency and enables the prevention of financial misrepresentation. Moreover, the need for consistency strengthens the qualitative characteristics of the financial statements like comparability and reliability. Without consistency the organizations would not be capable of selecting the most appropriate method for representing the financial position during a specific time-period.
The public accounting standards in Canada are expected to be converged with the global accounting standards. Therefore, the publicly accountable enterprises need to adopt the high quality, globally accepted accounting standards with the convergence of GAAP (Generally Accepted Accounting Standards) with the International Financial Reporting Standards (IFRS) over a specified transitional period. After the period is over, these organizations would follow the global accounting standards.
The new public accounting standards are expected to encompass the newly formulated standards of the International Accounting Standards Board as well as standards provided by US Financial Accounting Standards Board (FASB). Moreover, the existing standards would be replaced by the corresponding International Financial Reporting Standards. Besides this, the elimination of fundamental differences existing between the accounting standards provided by the Financial Accounting Standards Board and the International Accounting Standards Board would enable effective convergence.