Standard Setting in Political Environment
Introduction
Accounting standards dominate the accountant’s work. These standards are being constantly changed, deleted, and/or added to, both in the United States and abroad. They provide practical and handy rules for the conduct of the accountant’s work. They are generally accepted as firm rules, backed by sanctions for nonconformity. Accounting standards usually consist of three parts: * A description of the problem to be tackled * A reasoned discussion (possibly exploring fundamental theory) or ways of solving the problem * In line with decision or theory, the prescribed solution
In general, standards, especially auditing standards, have been restricted to the prescribed solution, which has generated a lot of controversy about the absence of supporting theories and the use of an ad hoc formulating approach. The general trend, however, is to include the description and the reasoned discussion, thereby providing a concise, theoretically supported rule of action.
The Public Interest Theory was implicit in our examination of standard-setting. The theory suggests that regulation is required to answer the demand of the public for correction of market failures. The theory assumes that the central authority has the best interests of the society as its objective. In other words it does its best to maximize social welfare. The regulation is a trade off between the costs involved and the benefits received by society. The Interest Group Theory takes the view that an industry operates in the situation where there are a number of interest groups (constituencies).
Development of standard setting approaches in various countries
IASB
The International Accounting Standard Board (IASB) is the independent, accounting standard-setting body of the IFRS. The IASB was founded on April 1, 2001 as the successor to the International Accounting Standard Committee (IASC). It is responsible for developing IFRS and promoting the use and application of these standards.
Accounting standards dominate the accountant’s work. These standards are being constantly changed, deleted, and/or added to, both in the United States and abroad. They provide practical and handy rules for the conduct of the accountant’s work. They are generally accepted as firm rules, backed by sanctions for nonconformity. Accounting standards usually consist of three parts: * A description of the problem to be tackled * A reasoned discussion (possibly exploring fundamental theory) or ways of solving the problem * In line with decision or theory, the prescribed solution
In general, standards, especially auditing standards, have been restricted to the prescribed solution, which has generated a lot of controversy about the absence of supporting theories and the use of an ad hoc formulating approach. The general trend, however, is to include the description and the reasoned discussion, thereby providing a concise, theoretically supported rule of action.
The Public Interest Theory was implicit in our examination of standard-setting. The theory suggests that regulation is required to answer the demand of the public for correction of market failures. The theory assumes that the central authority has the best interests of the society as its objective. In other words it does its best to maximize social welfare. The regulation is a trade off between the costs involved and the benefits received by society. The Interest Group Theory takes the view that an industry operates in the situation where there are a number of interest groups (constituencies).
Development of standard setting approaches in various countries
IASB
The International Accounting Standard Board (IASB) is the independent, accounting standard-setting body of the IFRS. The IASB was founded on April 1, 2001 as the successor to the International Accounting Standard Committee (IASC). It is responsible for developing IFRS and promoting the use and application of these standards.