What are accounting standards?

Accounting standards are essential guidelines that provide a framework for preparing and presenting financial statements. They ensure that financial reporting is consistent, comparable, and reliable across different organizations. The purpose of these standards is to ensure transparency and to offer stakeholders, including investors and regulators, a clear understanding of a company’s financial health.

The correct understanding of accounting standards encompasses their role in guiding the creation of financial reports that reflect the true economic reality of transactions, hence aiding in decision-making for users of financial information. These guidelines are applicable to a wide range of entities, not just public companies, emphasizing their broad relevance across various types of organizations.