Standard Setting
Accounting provides an important service to decision makers who expect certain qualities in the information provided. To ensure quality and usefulness of information, accounting observes certain standards, in the form of principles and pronouncements. Standard-setting organizations develop and promulgate accounting standards. These organizations’ leadership and membership are composed of respected members of the profession, recognized for their proven expertise and integrity. Standard setting follows well-defined, rigorous practices that include carefully selected agenda, public consultations, discussions, approval, and post implementation review.
At the end of this lesson, you shall be able to:
- Identify the information in general purpose financial reports related to standards
- Understand the nature and importance of standards
- Appreciate the relationship between cost of information and information risk
- Identify the standard setting organizations
- Understand the objectives, functions, and processes of the standard setting organizations
High quality accounting standards keep capitalism honest and contribute to trust in the economy. As most citizens are investors either directly or indirectly, financial reporting is important to them because it is a pre-requisite for well-functioning capital markets.
