In your opinion are accounting standards necessary and to what extent? Do you agree with the view that mandatory regulations stifle innovation ? why? Give reasons?
* Accounting standards are necessary to promote high quality financial reporting. The fundamental role of accounting is to communicate economic information about businesses and other organization to various stakeholders (government, investors, shareholders, suppliers, lenders, customers and the general public). * These stakeholders use such information to take decisions and to assess the stewardship of people appointed to manage such organizations. If this information is not of a high quality standard, then the stakeholders would be unable to take effective decisions that will benefit them. For example, if a financial report is manipulated to show higher profits, investors would hold on to their shares with the belief that the company is doing well. * Good and useful information should have the essential characteristics of understandability, comparability, relevance and reliability in order to play its role effectively. Accounting standards serve to promote the understandability , comparability, relevance and reliability of financial reports. * Accounting standards are needed so that financial statements will fairly and consistently describe financial performance. Without standards, users of financial statements would need to learn the accounting rules of each company, and comparisons between companies would be difficult.
Here are other reasons why accounting standards are important to every business. Protecting Investors
By employing accounting standards, investors’ interests are ensured as the documents they review are definitely accurate and genuine. As investors, they are interested to know that their money will eventually earn and go back to them. Accounting standards increase the investors’ confidence in the business. Regulatory Compliance
Government regulators set...