The key objectives of accounting standards are identification, measurement, and reporting of financial information of the organisational entities to the stakeholders. Financial accounting is a process culminating in the preparation of the financial reports of the organisations. These are done for the use of both the internal and external stakeholders. These financial statements include the balance sheet, the income statement, and the statement of the owner’ s equity and cash flow statement. Moreover, reporting the assets and expenses and other disclosures are also pretty significant in financial accounting and reporting.
There are a number of factors which have been influential in the accounting literature. Since the inception of accounting standards, political factors have been quite influential in the development of financial accounting standards in any region. The adoption or non-adoption of the international accounting standards may be at the discretion of the strong political and business entities. The most significant source of force to influence the development of accounting standards is user groups. These groups include the parties more affected by accounting standards, rules and regulations. “ Accounting standards are as much a product of political action as they are of careful logic or empirical findings” (Wiley, 2002, p. 14).
This statement proves the intensity of the political influence on the framing of accounting standards in any region. These groups of stakeholders may like to account or report some specific items in a specific way, or they may like to have disclosure of some specific items. In such a situation, they would fight hard to get these done. They know that the best way to influence these standards is to participate in the framing of the same or to try to influence or persuade the authority responsible for the formulation of the standards, amendment of the old ones and development of the new rules and regulations.
In the US, there are many authoritative bodies responsible for the formulation and development of the generally accepted financial standards.
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