The Causes And Implications Of Overloading Accounting Standards In The United States

The number of accounting standards issued by the United States is almost more than the sum of the world's standard documents, and all the generally accepted accounting standards are 4530 pages thick.

However, such a bloated system of standards does not ensure the healthy development of the capital market in the United States. The financial fraud cases of Enron, WorldCom, AOL Time Warner, southern health care and other listed companies fully illustrate this point.

There are two factors in general: the accounting standards system is complex, the accounting standards system is composed of two parts: accounting standards and interpretations, and the United States generally accepted accounting standards system is divided into four levels: the first level is the FASB standard announcement and explanation, the APB submission, the AICPA Accounting Research Bulletin; the second level is the industry audit and accounting guide of AICPA, the technical communiqu of FASB, and the opinion statement of AICPA; the third level is the Research Report of the emergency practice committee of FASB and the practical description of AICPA; the fourth level is the accounting interpretation of AICPA, the guide for the execution of FASB, the widely accepted or accepted industry accounting practice.

Many levels and complicated contents are one of the reasons why accounting standards are overloaded.

It is theoretically necessary to set up the accounting standards in the United States, but in the actual operation process, the formulation of accounting standards has turned to a rule based mode, and the rule based mode inevitably leads to bloated accounting standards.

There are two reasons for this: the environmental problems of FASB.

In order to avoid risks, all parties in the United States expect the guidelines to give "unique" answers to every question.

Companies need detailed rules to reduce uncertainty in paction design; CPAs need detailed rules to reduce professional judgment in practice, so as to avoid disputes with their clients and protect themselves in litigation.

In the case of the establishment of the leading accounting standards in the US folk structure, the standard structure lacks the necessary compulsion and can not form a perfect and authoritative conceptual framework.

Inductive method refers to a procedure to formulate accounting standards that maximize the utility of the principal according to the preferences of various subjects from various accounting methods of practice.

In essence, it is a collective choice process based on the set of subject preference.

In reality, there are various accounting treatments for the same or similar pactions and events. The accounting methods adopted by the main bodies in reporting pactions or events are different, and the financial accounting information generated naturally varies.

Because different financial accounting information is different in terms of the degree of satisfaction of the main body, different subjects also have different preferences for different accounting treatments.

When conflicts of preferences exist among different subjects, the induction of accounting standards is to select accounting methods that represent the interests of the community and the preferences of the majority of the subjects.

In retrospect of the history of American accounting standards, the Accounting Standards Committee (APB) tried to set up a complete set of accounting standards to guide the formulation of accounting standards so as to form a logical and consistent accounting standard system.

After the failure of APB's attempt, FASB has invested a lot of manpower and material resources to construct the conceptual framework of financial accounting. However, there still exist serious defects in the conceptual framework of accounting system, such as incomplete content, lack of logical consistency and vague concepts.

Deep analysis can find that the lack of consistency within the conceptual framework is the result of the current practice compliance. The incomplete content of the conceptual framework and the ambiguity of important concepts are mainly aimed at avoiding conflicts with practice.

FASB in order to maintain the right to make accounting standards, when formulating conceptual frameworks or accounting standards, it is necessary to make all kinds of announcements issued by the community as possible as possible, or to avoid conflicts with current accounting practices as far as possible.

It can be said that because FASB lacks the necessary coercive force, it can not provide systematic guidance for accounting standards making, nor can it provide the necessary theoretical basis and method for solving all accounting problems, resulting in the induction of FASB as the main method in accounting standard setting methods.

In order to improve the acceptability of the guidelines issued by FASB, in addition to the general norms of the regulated pactions or matters, there are many exceptions.

Influence of Accountants: accountants are tired of meeting the requirements of standards. On the one hand, they increase the cost of compiling accounting information, and on the other hand, accountants may neglect real work.

We know that accounting information should reflect the essence of the economy. At the same time, when a large number of new businesses and the "fire fighting" accounting standards are not standardized, accountants are often at a loss. Users of financial information are hard to understand complicated financial statements and annotations.

For example, the annotations of an American United Rental Inc in 10-K format indicate that it describes the company's revenue recognition method for financial leasing assets: direct financing lease - on the day of the direct financing lease, the company's balance sheet shows the total gross receivable, the estimated value of the leased equipment and the unrealized rental income.

The unrealized rental income is the difference between the total amount of gross receivable and the estimated residual value over the cost of the leased equipment.

The amount of the direct initial cost plus the loss preparation is recognized as income on the day of the lease.

From the second month of the lease, unrealized rental income is recognised as income based on the terms of the lease, net investment by lease and a roughly constant rate of return.

This note shows that only those who are familiar with the accounting jargon and the nature of accounting can understand, while the general users are puzzled, let alone for decision-making services.

The enterprise management knows that information provided by the accounting standards will not be opposed by external auditors, thus avoiding or reducing the risk of legal proceedings.

In practice, business management may choose or manipulate business practices to reduce the cost of information provision and audit, so as to achieve the purpose of whitewashing business performance and financial status.

The management of huge financial fraud cases such as Enron, WorldCom and so on is very keen on finding complicated "accounting rules" for their own advantage.

A certified public accountant is a watchdog in the capital market. It should focus on auditing, carry out strict auditing procedures, and give opinions on whether the accounting policies of the clients conform to the accounting standards.

However, faced with an increasing number of accounting standards which are more and more complicated, it seems that the ability of CPAs is not increasing.

In December 4, 2001, CEO of Andersen, Joe.

In an interview with reporters, Belal Dino regrets: "Andersen has no right to force clients to disclose risks and losses hidden in special purpose entities.

Customers often say that the guidelines do not require disclosure. You can not ask me to follow higher standards.

So he attributed the failure of Enron Corp to the guidelines. On the same day, the five big accounting firms issued a joint statement and criticized the complicated rules.

Revelation: China has promulgated 16 accounting standards, and more than 20 criteria are being comprehensively studied. It is believed that it will be available in the near future. We can see that China's standards have been greatly developed. With the change of external economic environment, we can see that more and more rules will be promulgated.

How to learn from the experience and lessons of the United States and guard against overloading of standards is a question worthy of our study.

The author thinks that the following aspects should be done: 1. straighten out the right of making the criteria, and avoid complicating the standard system.

According to the relevant laws and administrative regulations, the current arrangement for China's standard making power is that the accounting system and accounting standards are made by the accounting department of the Ministry of finance.

It can be seen that the standard setting power is mainly shared by the Ministry of Finance and the SFC.

Under the pattern of setting up the right of horizontal allocation, there is an inevitable struggle for departmental disputes, but we should avoid making a difference between ourselves and setting up a set of criteria. This requires the two departments to strengthen exchanges and communication, and to consult and cooperate on the scope of the norms, the basic requirements of the guidelines, the wording of the criteria, and the interpretation of the norms, so as to eliminate disharmony and avoid complicating the standard system.

2., we should strengthen the research of conceptual framework, and two guidelines should be integrated.

From the above analysis, we can see that the conceptual framework of financial accounting in the United States has not been consistently implemented in the formulation of accounting standards.

We should learn from this lesson, combine with our national conditions, study and formulate a logical, comprehensive, inclusive accounting concept and framework, and play a guiding role in formulating guidelines.

At the same time, judging from the current Chinese guidelines, China's accounting standards tend to be based on rules.

But in the long run, we need to incorporate two kinds of accounting standards, and adopt the rule basis for "special" and "critical" economic pactions and events, so as to prevent enterprises from abusing accounting policies.