OBJECTIVE OF ACCOUNTING STANDARDS-Meaning,Understanding,Primary Objectives (Commerce Achiever)

Objectives of Accounting Standards

Accounting is often considered the language of business, as it communicates to others the financial position of the company. And like every language has certain syntax and grammar rules the same is true here. These rules in the case of accounting are the Accounting Standards (AS). They are the framework of rules and regulations for accounting and reporting in a country. Let us see the main objectives of forming these standards.

1.  The main aim is to improve the reliability of financial statements. Now because the financial statements have to be made following the standards the users can rely on them. They know that not conforming to these standards can have serious consequences for the companies.
2. Then there is comparability. Following these standards will allow for inter-firm and intra-firm comparisons. This allows us to check the progress of the firm and its position in the market.
3. It also looks to provide one set of accounting policies that include the necessary disclosure requirements and the valuation methods of various financial transactions.

THE PRIMARY OBJECTIVE OF ACCOUNTING STANDARDS ARE:

• To provide a standard for the diverse accounting policies and principles.
• To put an end to the non-comparability of financial statements.
• To increase the reliability of the financial statements.
• To provide standards which are transparent for users.
• To define the standards which are comparable over all periods presented.
• To provide a suitable starting point for accounting.
• It contains high quality information to generate the financial reports. This can be done at a cost that does not exceed the benefits.
• For the eradication the huge amount of variation in the treatment of accounting standards.
• To facilitate ease of both inter-firm and intra-firm comparison.

The primary objective of accounting standards is to harmonize the different accounting policies. The policies are used in the preparation of financial reports. These reports could be prepared by different enterprises. This would bring about a certain degree of confusion at the time of comparison.

This is where the accounting standards come in. The objective of accounting standards is to bring a standard to the policies. This will facilitate easy comparison with respect to inter-firm and intra-firm reporting.