Accounting standards are primary policy documents. It is a common set of principles, standards and procedures that define the basis of financial accounting policies and practices. These standards, prepared by accounting specialist committee or government authorities, are regulated by the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB).
Accounting standards have included various aspects on recognition, recording, measuring, revision and presentation of accounting transactions that are reported in Financial Statements.
Having a set of accounting standards would strengthen the transparency of global financial reports and provide a clear standard for accounting practices, convenience and confidence for companies/enterprises, investors and all users of financial statements.
With the implementation of accounting guidelines on a national scale, countries would be able to define a common terminology with consistency, objectivity and a standard calculation of data on the financial statement, as shown in the statement of financial position and statement of comprehensive income.
Why are accounting standards important?
The implementation of accounting standard provides a lot of benefits for companies and investors such as:
• The consistency principle in accounting: Consistency principle requires companies/enterprises to record financial accounting in accordance with a relevant accounting framework. By requiring strict adherence to an accounting framework, every company/enterprise shall follow the same accounting standard on record accounting. Once companies follow the same standard, other parties can compare the financial results of a large number of companies/enterprises.
• Enhancing reliability of financial statements: The stakeholders of a company can rely on the information on financial statements prepared by the company as a primary source of information. Stakeholders can make decisions based on the reliable data provided by management or other related parties involved in the preparation of financial statements. Moreover, external parties such as potential investors can make investment decisions based on the financial statements.
• Assisting auditors: The accounting standards lay down all the accounting policies, rules, regulations in a written format that shall be followed. Once the company has followed all standard rules and policies, auditors can express an opinion toward the financial statements in a true and fair view. In contrast, if the accounting records are not in accordance with the applicable financial standards, auditors can conclude that the data presented in the financial statement may be inaccurate.
• Regulatory compliance: Government policies on corporate governance must ensure all accounting standards are adopted by all companies. This is beneficial for investors or business proprietors as well as for customers or clients because it can protect against fraud practices or financial misreporting by companies. It also promotes transparency between business transactions that will eventually lead to an improvement in market efficiency.
Accounting Standards for Issuer in Cambodia
National Accounting Council (NAC) is a regulator of the Royal Government of Cambodia empowered with the role of governing, strengthening and promoting the development of the accounting and auditing profession in Cambodia. NAC works as a Secretariat of the Ministry of Economy and Finance (MEF) with the mission of governing and developing the accounting and auditing sector. It achieves this through by preparing, implementing, monitoring and evaluating policies, legal framework and relevant financial reporting regulations.
Prakas No. 068 issued on January 8, 2009 on “Implementation of Cambodia Financial Report” stated that “All the companies/industries in Cambodia shall fully adopt International Financial Reporting Standard issued by the International Accounting Standard Board (IASB) including all interpretations and modifications”.
On August 28, 2009 NAC also issued the notification No. 097/09 on “The Implementation of Cambodia International Financial Reporting Standards (CIFRS) and CIFRS for SMEs”.
Moreover, MEF also issued Prakas No. 101 on February 24, 2011 on “Implementation Financial Reporting Standard for Issuer” stated that “All issuers shall follow CIFRS.
Therefore, all companies interested in adopting good corperate governance practices in Cambodia must comply with the relevant standards announced and sanctioned by MEF.
Prepared by: Securities and Exchange Commission of Cambodia
Securities Issuance Supervision Department
E-mail: [email protected]
Phone: 023 885611