The role of financial accounting in today's business environment is undeniably important. The information provided by accountants can have major influences over a number of different people and parties, from a firm's management team, to an external investor. Here in the UK, we have a large and complex stock market system as well as broad based community of investors. As such, it is vital that the profession be properly regulated and monitored.
The fundamental principle upon which all UK regulation is based, is that accountants should be constantly striving to 'provide a true and fair view' to any interested parties. Traditionally, accounting regulations have been formulated loosely around the main principles of accounting, such as the prudence convention, the going concern convention, etc. This approach to accounting regulation did however leave the actual methods of application of these conventions up to the preparers of the financial information.
In 1970, the accounting profession establish its own self regulated body - this was the Accounting Standards Steering Committee (ASSC).
There were a number of reasons why the body was set up, however it was done primarily as a reaction to a number of financial scandals in the 1960s. Other influences included the establishment of similar bodies in the USA, as well as the threat of governmental influence on the accounting profession, which nobody wanted.
The ASSC later became known as simply the ASC (Accounting Standards Committee), but not before issuing a number (25 in all) of 'Statements of Standard Accounting Practice' (SSAP). These statements were designed to act as the fundamental underpinnings of accounting practice in the UK. The statements, whilst mostly accepted across the industry, did however come for their fair share of criticism. The lack of enforceability, as well as inconsistencies amongst the standards ultimately resulted in the downfall of...