Question

Do you believe that the general approach of the SEC in regards to setting accounting standards has changed over time? What do you think are some of the historical factors that have affected this trend?

Answer 1

Yes the setting of Accounting Standards can be change depends upon the situations. Various Acts of Congress clearly state the authority of the Commission to prescribe the methods to be followed in the preparation of accounts and the form and content of financial statements filed under the federal securities laws. More generally, these statutes charge the Commission with responsibility to ensure that investors receive information necessary for informed investment decisions. As this is public company and if there is any issue or changes or something misleading found by the SEC then they have the rights to change or omit the Accounting Standards.

The lists of the following factors that affect accounting standards will be:

1) Type of capital market, 2) Financial reporting system, 3) Types of business entities, 4) Legislative system, 5) Application degree of legislation, 6) Inflation level, 7) Political and economic relations with other countries, 8) Status of the accounting profession, 9) Existence of a conceptual framework, 10) Quality of education in accounting. In addition to the above, influential factors can also be classified as 1) Legal system, 2) Political system, 3) Nature of ownership, 4) Differences in the size and complexity of business entities, 5) Social climate, 6) Level of sophistication of administration and the financial community, 7) Level of legislative interference in the operations of entities, 8) Existence of specific accounting legislation, 9) Speed of business innovations, 10) Level of economic development, 11) Growth pattern of an economy, 12) Status of professional education and profession associations.