Academic journal article Current Politics and Economics of South, Southeastern, and Central Asia

Development of Accounting Standards Setting Procedure in South Asia

Academic journal article Current Politics and Economics of South, Southeastern, and Central Asia

Development of Accounting Standards Setting Procedure in South Asia

Article excerpt


Accounting standards are the norms of accounting policies and practices issued by the accounting bodies, national and international, for the guidance of their members regarding the treatment of the items, which make the financial statements and their disclosure therein (Azizuddin 1991). The establishment and enforcement of standards is an important issue for the accounting profession and its interested users. Determining the best mechanism to employ in the establishment of uniform accounting standards in particular country or religion is also very important due to cultural, regional, economical factors (Mia, 2005) that increase the acceptability and usefulness of accounting standards (Belkaoui and Jones, 1996). The interchangeably used word "principles" and "standards" (Keiso and Weygandt, 2003) dominate and guide the accountants' work both in service and practice. Realizing this importance of accounting guideline, around 29 years ago, the representatives of sixty-three accounting organizations of accountants from fifty-one countries, assembled at the 11th World Congress of Accountants in Munich, Germany and signed the charter which gave birth to the International Federation of Accountants (IFAC)-a body for globalization of accounting standards although the International Accounting Standards Committee (IASC) had been established in 1973 in London. International professional organizations are, therefore, in their late twenties, a young age by any standard, a tender age, when measured against the backdrop of the fullness of time. The track record in these twenty nine years has been, however, quite remarkable. Not only IFAC and IASC are universally recognized as the bond that ties together all aspects of accounting profession around the world, but they are credited as the international standard setters for the accounting profession. Accounting profession, nowadays, speaks for the worldwide profession. Voice of this profession is heard with respect by organizations such as the United Nations, the World Bank, and the World Trade Organization, the regional development banks and all major trade and professional groups of the world. Convergence of accounting standards worldwide is happening sooner than the world expected and this is evidenced by the fact that all publicly listed companies in the European Union will, by law, from the year 2005 have to apply a single set of accounting standards - the International Financial Reporting Standards (IFRS). The IFRS are emerging as the global accounting standards with more than 100 countries using them in one form or another. However, there is a need for accounting standards and implementation thereof heavily regional settings, culture, rules and regulations etc. That is why regional standard setting is essential. Accounting bodies of developed countries are issuing and releasing standards which are being adopted by other parts of the world with no or less modifications. This has not been yielding expected benefits to the concerned stakeholders. That is why regional, cultural based development and adoption of standards are important for the development and implementation of accounting standard. Accounting standards are being constantly changed, deleted, and/ or added to, in the United States and countries around the world. They are generally accepted as firm rules, backed by sanctions for nonconformity. Accounting standards usually consist of three parts.

a) A description of the problem to be tackled.

b) A reasoned discussion (possibly exploring fundamental theory) or ways of solving the problems.

c) Then, in line with decision or theory, the prescribed solution. (Belkaoui, 1996)

In general, standards, especially auditing standards have been restricted to point (c), which has generated a lot of controversies about the absence of supporting theories and the use of an ad hoc formulating approach. The general trend, however, is to include parts 1 and 2, thereby providing a concise, theoretically supported rule of action. …

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