Historical development of accounting standard in india
Answers
Accounting has a very long history that dates back hundred years ago when a Franciscan Monk named Luca Pacioli invented double-entry bookkeeping.
During the years of unprecedented economic growth, companies took the lead in the modernization of financial reporting by providing clear, comparable and reliable financial information to investors.
After the stock market crash of 1929, many investors and other market participants felt that insufficient and misleading accounting and reporting has inflated stock prices that eventually crashed the stock market and followed by the Great Depression.
The continuing pressures on the accounting profession to establish accounting standards has prompted the American Institute of Accountants (now known as the AICPA) and the New York Stock Exchange to start an effort to review and revise financial reporting requirements.
A few years later, the Securities Act of 1933 and the Securities Exchange Act of 1934 were passed into law to restore investor confidence. The Securities Act sets forth the accounting and disclosure requirements for the initial offering of stocks and bonds while the Securities Exchange Act sets the reporting requirements for secondary market offerings.
The 1934 act also created the U.S. Securities and Exchange Commission (SEC) which was mandated with both the power and responsibility for standard-setting of financial accounting and reporting for publicly-traded companies. But the SEC while keeping the power to set standards has chosen to delegate its rule-making responsibilities to the private sector. This means that if the SEC does not conform to a specific standard issued by the private sector, it has the authority to change that standard, which it has done in the past. Despite delegating its rule-making responsibility, the SEC issues its own accounting pronouncements called Financial Reporting Releases (FRRs).
Early Standard Setting
A committee of the American Institute of Accountants, the Committee on Accounting Procedure (CAP) was the very first private-sector standard setting body. During its existence from 1938 to 1959, the CAP issued 51 Accounting Research Bulletins (ARBs). Since, it has not established a financial accounting conceptual framework, its rule-making approach of dealing with accounting and reporting problems and issues was subject to severe criticism.
The CAP was then replaced by the Accounting Principles Board (APB) which was able to issue 31 Accounting Principles Board Opinions (APBOs), 4 Statements and several interpretations during its tenure from 1959 to 1973. In contrast to its predecessor, it attempted to establish a conceptual framework with its APB Statement No. 4 but failed. In addition to its unsuccessful effort to create a framework, it was also under fire for its apparent lack of independence because its board members were supported by the AICPA and that other interest groups were not represented in the rule-making process.