Essay: Reason for the Economic Meltdown

Sample Essay

In the current economic crisis organizations are already reluctant of implementing newer standards and some organizations especially banks and financial institutions even criticize the application of fair value accounting standards as the real reason for the economic meltdown (Jones). The reluctance makes it much harder to implement new accounting standards which may require significant changes in current accounting practices and would result in major time lags.

Companies view the accounting standards historically being implemented as the best standards and do not want to change these standards especially companies in America that view standards set out by FASB as the best imply that instead of convergence these standards should be applied to other parts of the world. It would be quite difficult in lieu of this scenario to implement a common set of standards in different companies working under different regulatory environments. A variety of standards for income tax, insurance contracts and treatment of loans are implemented in the current accounting standards and a single standard for each of these issues would not only decrease the time lag in implementation of standards but would also considerably improve the interpretation of financial statements prepared using new standards.

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