What is Accounting Standard?

Definition

Accounting standards refer to a set of unified principles, standards, and procedures that define the basis of financial accounting policies and practices. These standards aim to ensure transparency, consistency, and comparability in financial reporting, allowing financial information from different companies to be accurately understood and compared.

Origin

The origin of accounting standards can be traced back to the early 20th century, as countries recognized the importance of establishing unified accounting standards amid rapid global economic growth. In 1973, the International Accounting Standards Committee (IASC) was established, marking the formal beginning of international accounting standards. In 2001, the IASC was renamed the International Financial Reporting Standards Foundation (IFRS Foundation), continuing to promote the unification of global accounting standards.

Categories and Features

Accounting standards are mainly divided into International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP). IFRS is widely adopted globally, emphasizing transparency and comparability of financial information. GAAP is primarily used in the United States, focusing on detail and strict adherence to rules. While there are differences in their application, both aim to enhance the quality of financial reporting.

Case Studies

Case 1: Apple Inc., as a global company, adopts IFRS for financial reporting to facilitate international investors' understanding of its financial status. By adhering to IFRS, Apple can provide transparent and comparable financial information, boosting investor confidence. Case 2: Walmart, the largest retailer in the United States, follows GAAP for financial reporting. The detailed rules of GAAP help Walmart maintain consistency and accuracy in a complex financial environment.

Common Issues

Common issues investors face when applying accounting standards include inconsistencies in financial information due to differences in accounting standards across countries and misunderstandings of complex accounting standards. The key to resolving these issues is to deeply understand the core principles of the standards and seek professional accounting assistance when necessary.