Before the introduction of accounting standards, accounting practices varied from enterprise to enterprise – there was inconsistency and occasionally practices were inappropriate.

Intercompany and inter-period comparisons were difficult as enterprises changed accounting policies and resorted to, for example, ‘window-dressing’ and ‘reserve accounting’.

Discuss the extent to which the publication of more than 20 accounting standards has overcome these problems. Illustrate your discussion by reference to specific accounting standards.

ICAEW, Financial Accounting 2, July 1993 (12 marks)