what is an accounting standard 
an accounting standard is a common set of principles standards and procedures that define the basis of financial accounting policies and practices understanding accounting standardsaccounting standards improve the transparency of financial reporting in all countries in the united states the generally accepted accounting principles gaap form the set of accounting standards widely accepted for preparing financial statements 1 international companies follow the international financial reporting standards ifrs which are set by the international accounting standards board and serve as the guideline for non u s gaap companies reporting financial statements 23the generally accepted accounting principles are used widely among public and private entities in the united states the rest of the world primarily uses ifrs multinational entities are required to use these standards the international accounting standards board iasb establishes and interprets the international communities accounting standards when preparing financial statements 2accounting standards relate to all aspects of an entity s finances including assets liabilities revenue expenses and shareholders equity specific examples of accounting standards include revenue recognition asset classification allowable methods for depreciation what is considered depreciable lease classifications and outstanding share measurement the american institute of accountants which is now known as the american institute of certified public accountants and the new york stock exchange attempted to launch the first accounting standards in the 1930s 4 following this attempt came the securities act of 1933 and the securities exchange act of 1934 which created the securities and exchange commission 5 accounting standards have also been established by the governmental accounting standards board for accounting principles for all state and local governments 1accounting standards specify when and how economic events are to be recognized measured and displayed external entities such as banks investors and regulatory agencies rely on accounting standards to ensure relevant and accurate information is provided about the entity these technical pronouncements have ensured transparency in reporting and set the boundaries for financial reporting measures u s gaap accounting standardsthe american institute of certified public accountants developed managed and enacted the first set of accounting standards in 1973 these responsibilities were given to the newly created financial accounting standards board 6 the securities and exchange commission requires all listed companies to adhere to u s gaap accounting standards in the preparation of their financial statements to be listed on a u s securities exchange 7accounting standards ensure the financial statements from multiple companies are comparable because all entities follow the same rules accounting standards make the financial statements credible and allow for more economic decisions based on accurate and consistent information financial accounting standards board fasb an independent nonprofit organization the financial accounting standards board fasb has the authority to establish and interpret generally accepted accounting principles gaap in the united states for public and private companies and nonprofit organizations 8 gaap refers to a set of standards for how companies nonprofits and governments should and present their financial statements 1