Accountancy is adherence and compliance with major rules that ensures the integrity of financial reports. Here are the major accounting regulations:
1. Generally Accepted Accounting Principles (GAAP)
GAAP are accounting standards, principles, and procedures that firms within the United States must observe when issuing their financial statements
This provides consistency and transparency that makes it easier for investors and other regulatory bodies to compare financial information across firms.
The SEC demands that all publicly traded firms report according to GAAP.
2. International Financial Reporting Standards (IFRS)
IFRS is a set of international standards for accounting that has been produced by IASB.
Over 140 countries, the EU, Australia, Canada, and more than 100 more adopt IFRS or harmonize to IFRS
The core goal of IFRS is to have standardization for countries, mainly beneficial for multinational firms.
3. Sarbanes-Oxley Act (SOX)
Enacted in response to the sensational financial scandals like Enron, the SoX imposes extremely stringent reforms to augment financial disclosures so that frauds can be sidestepped.
It mandates publicly traded companies to institute internal controls and processes over their system for the reliability and integrity of their financial information.
Key provisions include Section 404 that requires a company to evaluate and report on the effectiveness of their internal controls over financial reporting.
4. FASB and IASB Convergence
FASB is the body which sets GAAP, while IASB is the body formulating IFRS. The two boards have been working their way to converge their standards towards simplification of financial reporting borders.
While not totally converged, most the differences in GAAP and IFRS have been crunched out as many aspects have been aligned.
5. Revenue Recognition Standards (ASC 606 / IFRS 15)
ASC 606 (under GAAP) and IFRS 15 under IFRS provided a new standard for the recognition of revenue over contracts with customers.
The principles to be applied should ensure revenue is recognized such that it would reasonably reflect to the transaction involving the exchange for goods or services with customers.
6. Internal Revenue Code (IRC)
The IRC refers to a compilation of law providing federal tax legislation in the United States.
The companies need to comply with the tax laws and accurately report income and deductions or also the correct amount of credits as per the IRS norms.
7. Anti-Money Laundering (AML) and Know Your Customer (KYC)
These are rules relating to financial institutions that are being used for money laundering, funding terrorism, and other crimes.
Banks, investment houses, and all other financial service providers require procedures to verify customer identity and monitor suspicious transactions for AML/KYC compliance.
8. Data Privacy Laws (GDPR / CCPA)
Data privacy laws, GDPR in Europe and CCPA in California affect the way financial and customer data is stored, processed, and kept. Not accounting rules in principle, they are still very relevant for accountants because breaching them incurs large fines and may lose data.
9. Environmental, Social, and Governance (ESG) Reporting Standards
Companies are being called on to illustrate ESG reporting since it relates to their ventures for sustainability.
Most companies, even in the absence of strict imperatives, realize the advantages of adhering to ESG principles, and growing demands for these regulations, such as the CSRD of the EU, further heighten reporting needs.
10. Public Company Accounting Oversight Board (PCAOB) Standards
The PCAOB is an oversight body that governs auditing of public companies in order to safeguard investors and ensure that audit reports are sound.
Public companies should ensure their audit is observed with PCAOB standards, especially where matters like audit independence, reporting on internal controls, and professional skepticism are concerned.
Keeping Abreast and Observing Compliance
Those days of no change in regulations for decades are long gone. Accounting and auditing rules move forward steadily, so accountants need to be updated on these changes and attend related training and have a good set of internal policies and procedures in place to ensure compliance.