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THE NEED FOR

INTERNATIONAL
ACCOUNTING
STANDARD
THE NEED FOR INTERNATIONAL
ACCOUNTING STANDARD

accounting in the early 1900s-1 

.accounting practices was unregulated- 

firm relied on loan-capital which was supplied by outside creditors and- 


.bankers
.each firm followed it is own accounting practices- 

no comparability between two firm existed and neither did consistency- 

.for the same firm over time


because there were few investors this situation was not major concern- 
.at that time
THE NEED FOR INTERNATIONAL
ACCOUNTING STANDARD

.first pubic investment boom-2 

.the world war I- 

.issuing liberty bonds- 

the first real opportunity to “invest" and earn a- 

.return, interest
the united states became the chief supplier of- 

materials to the allies, which helped USA more


wealthy than they had ever been and paved the way
. for the post WWI period
THE NEED FOR INTERNATIONAL
ACCOUNTING STANDARD

.retire the liberty bonds- 

this repayment was coupled with low inflation- 

.increasing productivity and automobiles company

the repayment of war bond resulted in an- 

.investment boom in stock


THE NEED FOR INTERNATIONAL
ACCOUNTING STANDARD
.The great depression-3 
.the investment boom led to crash of the stock market in 1929- 

.climb of the stock market before the crash was financial trickery- 

that is people were sold stock rather than investing in it , and- 


accounting was one of the tools used to sell stock , with no standard
body to set uniform standard , accounting practices could not react to
.change in business investment
the absence of standard body allowed firm to use accounting- 
.principles that presented the view management wanted
THE NEED FOR INTERNATIONAL
ACCOUNTING STANDARD

.THE NYSE OVERTURE-4 


after the crash NYSE had vested interest in restoring- 

.investor confidence in the stock and investment


contacted the AMERICAN INSTITUTE OF- 

ACCOUNTANTS(AIA) to develop of acc.principles that could


.be required of firm listed on the market
the AIA set five principles dealt mainly with what element- 

.should be included in determining current net income


:there are two significant things to consider- 

this was the first real attempt to codify accounting principles-1 

.by the profession


to describe this list , the phrase “accepted accounting-2 

”principles “ this was later changed to “ GAAP


THE NEED FOR INTERNATIONAL
ACCOUNTING STANDARD

.second investment boom-5 

.WWII- 

need of expand the national economy thought capital- 

.investment
Doubling in the number of stockholder- 

narrowed the range of acceptable accounting practices- 

.and flexibility
this put the spotlight on accounting as these investors- 

had major problems with the lack of comparability


.among firms
THE NEED FOR INTERNATIONAL
ACCOUNTING STANDARD
Progress and the need to find a* 
mechanism for the development of
.accounting

The emergence of significant * 


differences in defining the concepts in
.the financial statements