Definition

Noun: A principle that governs current accounting practice and that is used as a reference to determine the appropriate treatment of complex transactions. It is a formal guideline or rule established by a recognized authority to ensure consistency, comparability, and transparency in financial reporting.

Usage

An accounting standard is used to prescribe how specific types of transactions and other events should be recognized, measured, presented, and disclosed in financial statements. Adherence to these standards is crucial for ensuring that financial information is reliable and can be meaningfully compared across different companies and time periods.

Examples

• The company's financial statements are prepared in accordance with the relevant accounting standard.
• The new accounting standard on revenue recognition significantly changed how software companies report their earnings.
• Auditors check if the firm's depreciation method complies with the applicable accounting standard.

Advanced Usage

• Convergence of accounting standards: Refers to the process of reducing differences between major sets of accounting standards, such as U.S. GAAP and International Financial Reporting Standards (IFRS).
  • The global accounting standard convergence project aims to create a single set of high-quality international standards.
• To adopt/apply an accounting standard: To begin using a specific standard in financial reporting.
  • The board decided to adopt the new accounting standard early, ahead of the mandatory effective date.

Variants and Related Words

• Accounting Standards (plural): The collective body of these rules and principles.
  • International Financial Reporting Standards (IFRS) are a comprehensive set of accounting standards.
• Standard-setter (noun): An authoritative body that establishes accounting standards (e.g., the Financial Accounting Standards Board (FASB) or the International Accounting Standards Board (IASB)).
  • The standard-setter issued a discussion paper to gather public opinion on the proposed change.

Synonyms

• Financial reporting standard: A term often used interchangeably with accounting standard.
• Accounting principle: A broader term that can refer to fundamental concepts (like accrual accounting) as well as specific standards.

Related Phrases

• In compliance with accounting standards: A phrase used to affirm that financial reports follow the required rules.
  • The annual report states that it has been prepared in full compliance with applicable accounting standards.
• To depart from an accounting standard: To not follow a standard, which is generally not permitted unless specific disclosures are made.
  • A departure from the primary accounting standard is only allowed in extremely rare circumstances.

Noun

1. a principle that governs current accounting practice and that is used as a reference to determine the appropriate treatment of complex transactions