The generally accepted accounting principles are used by organizations for purposes of preparation, presentation and reporting on financial statements. It is adopted by private organizations, publicly traded companies, nonprofit making organizations and parastatals. The Financial Accounting Standards Board (FASB) establishes rules for private and public companies, and non-profit organizations (Greuning & Marius, 43). Governmental Accounting Standards Board (GASB) on the other hand determines a different set of principles and assumptions for local and state governments. Federal Accounting Standards Advisory Board (FASAB) performs similar roles for government entities.
The Financial Accounting Standards Board (FASB) is a non-profit institution which develops the generally accepted accounting principles (GAAP) for public’s interest in the United States. This board was designated by the Securities and Exchange Commission (SEC) to set accounting standards for public companies in 1973 (Needles et al., 56). It replaced the board that governed the accounting principles and the committee on accounting procedure of the American Institute of Certified Public Accountants (AICPA). Pronouncements of the forerunner bodies remain in force unless amended or superseded by the FASB.
The mission of FASB is to establish and maintain financial accounting and reporting standards to guide and educate users of financial information like the auditor’s shareholders and the general public, including issuers. It does this by improving the significance of financial reporting through a focus on qualities of comparability, consistency, and reliability. It also considers any scarcity in financial reporting that might be improved through standard setting; promotes the quality of financial reporting; improves the common understanding of the nature and purposes of information in the financial reports and ensures that the standards are current in order to reflect the changes in methods of doing business in the economy.
The FASB is sovereign of government, business and the professional organizations. It is subject to supervision by the Financial Accounting Foundation (FAF) that selects the board and funds it. FASB consists of seven permanent members who are appointed for a five-year term. They are required to dissolve all ties to previous firms and institutions that they may have served before to ensure the objectivity and independence of the FASB. They are and are entitled for one additional five-year term
FASB established the Accounting Standards Codification to act as a source of authoritative non-governmental U.S. widely accepted accounting principles. The Accounting Standards Codification organizes the many aspects that constitute U.S. GAAP into a searchable and consistent arrangement (Needles et al., 48). This Codification should be confused with the FASB's Conceptual Framework, which develops a theoretical basis for the development of accounting standards in the United States. The IASB has set plans to converge IFRS and US GAAP into one. As part of this project, it has begun moving to adoption of the fair value principle from the principle of historical cost.
International Financial Reporting Standards (IFRS) are considered as a global language for business affairs so that companies’ financial statements are comparable and understandable across the international boundaries. They are a result of growing international shareholding is crucial for companies that have dealings in numerous countries. They are increasingly replacing the many different national accounting standards. They provide the rules and principles to be followed by accountants to maintain books of accounts which are comparable, relevant, reliable and understandable, as per the external and internal users’ needs. It began as an attempt to harmonize accounting around the world. They are sometimes still called the original name of International Accounting Standards issued between 1973 and 2001 .The International Accounting Standards Board continued to develop standards calling the new standards International Financial Reporting Standards (IFRS)
Through the use of Computerized Accounting Systems (CAS), organizations have done away with manual spreadsheets, paper ledgers and hand written financial statements. Instead, the CAS system has improved their ability in tracking and recording financial transactions (Choi, et al., (78). A significant impact of the computer revolution is that, the accounting systems can be tailored to suit the specific needs of different organizations, business operations have been made more flexible and can be changed to reflect current economic changes, thus resulting in enhanced and effective decision making.
Choi, et al., (45) asserts that, in line with the global trends of conducting business, use of computerized systems in accounting has increased functionality, improved accuracy, improved on external reporting and enabled faster processing of financial information. Due to the effects of globalization, there is a lot of competition in the business industry, hence the need to woo potential investors. Just like any other fields, accountancy as a practice has made use of modern accounting systems improve on their reporting trends.
Laws regarding tax have also had an impact the practice of accounting. For instance, the use of Generally Accepted Accounting Standards (GAAP) which many accountants were acquainted to have been replaced by International Financial Reporting Standards (IFRS). This change has also had an impact on the accounting college syllabus, as students have to learn and have a working knowledge on the new way of financial reporting (Needles et al., 56). In line with the computer revolution, the manual system of filling tax returns has also been replaced by e-filling. Research statistics showed that in the year 2010, more than 70% of the population in the U.S electronically filled their tax returns, an indication that the accounting practice was adopting a new trend in its transactions (Needles et al., 56).