accounting standards

accounting standards

I hope this link to the Accounting Standards website helps<BR><a target=new class=ftalternatingbarlinklarge href="http://www.asb.org.uk/about/">The FRC</a>

accounting standards

Accounting Standards are a fundamental tool used by the profession to ensure that reporting tools (e.g. financial statements) comply with prescribed criteria which doesn't just apply to certain company's in certain industries but to companies in the UK as a whole.<BR><BR>If Financial Reporting Standards (and also SSAPs) did not exist, the accountancy profession would simply be out of control. There would be no guidelines as to how items within the accounts should be treated and as a consequence directors and shareholders would be free to do what they like with the accounts and how they like. Accounting Standards are therefore in place to ensure that company's follow them and that there are no doubts as to how items should be treated. FRS 12 (Provisions etc) is a prime example. Before FRS 12 arrived, companies used to put provisions in the accounts left right and centre to either reduce or increase their profits depending on what the shareholder's wanted (this was also referred to as "big bath" accounting). Prior to FRS 12 there was no legislation in place to stop directors or shareholders putting provisions in, say 2004 accounts and reversing them out in say 2008 accounts if 2008 was a bad year and the shareholders were expecting huge profits. FRS 12 arrived and 3 criteria now has to be met before a provision can be placed. This caused chaos with certain companies who objected to this - they had no choice - they had to adhere to it.<BR><BR>Hopefully this explains the necessity of accounting standards - let me know if you need any more clarification.<BR><BR>Regards<BR>Steve