Accounting For Dummies®, 4th Edition

12.3. Staying on Top of Accounting and Financial Reporting Standards

NOTE

Standards and requirements for accounting and financial reporting don't stand still. For many years, changes in accounting and financial reporting standards moved like glaciers — slowly and not too far. But, just like the climate has warmed, the activity of the accounting and financial reporting authorities has warmed up. In fact, it's hard to keep up with the changes.

Without a doubt, the rash of accounting and financial reporting scandals over the last two decades or so was one major reason for the step-up in activity by the standard setters. The Enron accounting fraud not only brought down a major international CPA firm (Arthur Andersen) but also led to passage of the Sarbanes-Oxley Act of 2002 and its demanding requirements on public companies regarding establishing and reporting on internal controls to prevent financial reporting fraud.

The other major reason for the heightened pace of activity by the standard setters is, in my opinion, the increasing complexity of doing business. When you look at how business is being conducted these days, you find more and more complexity — for example, the use of financial derivative contracts and instruments. The legal exposure of businesses has expanded, especially in respect to environmental laws and regulations. There is a move toward the internationalization of accounting and financial reporting standards, as I discuss in Chapter 2.

NOTE

In my view, the standard ...