Dearing Report

The Dearing Report, officially titled 'The Making of Accounting Standards,' was a landmark document published in 1988 aimed at reforming the setting of accountancy standards in the UK.

Overview

The Dearing Report, formally known as The Making of Accounting Standards, was the product of a committee chaired by Sir Ronald Dearing. The report was published in 1988 and aimed at overhauling the method through which accountancy standards were set in the United Kingdom. Its recommendations led to significant structural changes, including the dissolution of the Accounting Standards Committee (ASC), the establishment of the Accounting Standards Board (ASB), and the creation of the Financial Reporting Council (FRC).

Key Recommendations

Replacement of the Accounting Standards Committee

The report recommended replacing the ASC due to concerns over its effectiveness and influence on developing robust accounting standards. The ASC, which had been responsible for setting standards since its inception, was deemed too narrow and insufficiently robust in its methods.

Establishment of the Accounting Standards Board

The formation of the Accounting Standards Board was a crucial element of the report, suggesting a more authoritative and specialized body that would assume the responsibility for standard-setting in the UK.

Creation of the Financial Reporting Council

To ensure high-level oversight and to create a bridge between various stakeholders, the report called for the creation of the Financial Reporting Council. This body was tasked with responsibility for the broad oversight of the accounting standards and the conduct of financial reporting.

Examples and Implications

  1. Greater Transparency: Following the implementation of the Dearing Report, UK companies experienced a shift towards more transparent and consistent financial reporting standards.
  2. Unified Standards: The formation of the ASB under the recommendations of the Dearing Report allowed for more cohesive and uniform standards that aligned more closely with international standards.

Frequently Asked Questions (FAQs)

What was the primary purpose of the Dearing Report?

The primary purpose was to reform how accounting standards were created and enforced in the UK, fostering greater transparency and consistency in financial reporting.

Who chaired the committee responsible for the Dearing Report?

The committee was chaired by Sir Ronald Dearing.

What major bodies were established as a result of the Dearing Report?

The recommendations led to the establishment of the Accounting Standards Board (ASB) and the Financial Reporting Council (FRC).

Why was the Accounting Standards Committee replaced?

The ASC was deemed to be inadequate in its role of setting high-quality and robust accounting standards, which led to proposals for its replacement with a more authoritative body, the ASB.

When was the Dearing Report published?

The Dearing Report was published in 1988.

  • Accounting Standards Committee (ASC): The body initially responsible for setting accounting standards in the UK, later replaced by the ASB.
  • Accounting Standards Board (ASB): Established as per the Dearing Report, it took over the responsibility of setting accounting standards from the ASC.
  • Financial Reporting Council (FRC): An independent regulatory body created to oversee financial reporting and compliance with accounting standards in the UK.

References

Suggested Books for Further Studies

  • “Accounting Standards: True or False?” by Frederick D. S. Choi
  • “International Financial Reporting and Analysis” by Carien van Mourik and Peter Walton
  • “Financial Accounting and Reporting” by Barry Elliott and Jamie Elliott
  • “UK GAAP 2019” by Ernst & Young LLP

Accounting Basics: “Dearing Report” Fundamentals Quiz

### What was the main goal of the Dearing Report? - [ ] Redefine corporate taxes - [x] Reform the setting of accountancy standards in the UK - [ ] Increase government subsidies - [ ] Reduce fiscal budgets > **Explanation:** The Dearing Report aimed to reform the setting and enforcement of accountancy standards in the UK to ensure greater transparency and consistency in financial reporting. ### Who chaired the committee responsible for the Dearing Report? - [ ] Sir David Tweedie - [ ] Michael Izza - [x] Sir Ronald Dearing - [ ] Robert Hodgkinson > **Explanation:** The committee was chaired by Sir Ronald Dearing, leading to the comprehensive report "The Making of Accounting Standards" published in 1988. ### What key organization was established following the Dearing Report's recommendation? - [x] The Accounting Standards Board (ASB) - [ ] The Financial Accounting Standards Board (FASB) - [ ] International Accounting Standards Committee (IASC) - [ ] The Securities and Exchange Commission (SEC) > **Explanation:** The Dearing Report recommended the establishment of the Accounting Standards Board (ASB) to ensure high-quality and coherent accounting standards. ### Which agency provides oversight to the Accounting Standards Board (ASB) in the UK? - [ ] The Office for National Statistics (ONS) - [ ] Her Majesty's Revenue and Customs (HMRC) - [x] The Financial Reporting Council (FRC) - [ ] The Financial Conduct Authority (FCA) > **Explanation:** The Financial Reporting Council (FRC) provides oversight and ensures compliance with accounting standards set by the ASB. ### When was the Dearing Report published? - [ ] 1975 - [x] 1988 - [ ] 2001 - [ ] 1995 > **Explanation:** The landmark Dearing Report, _The Making of Accounting Standards_, was published in the year 1988. ### What was the main reason for replacing the Accounting Standards Committee (ASC)? - [ ] Excessive governmental control - [x] Inefficiency and ineffectiveness in setting robust accounting standards - [ ] Overlap with tax regulations - [ ] Global financial crisis > **Explanation:** The ASC was replaced due to its inadequate performance in setting high-quality and robust accounting standards, prompting a need for a more authoritative body. ### Which body was primarily involved in setting accounting standards before the Dearing Report recommendations? - [ ] The Financial Conduct Authority (FCA) - [ ] The Financial Practices Board (FPB) - [x] The Accounting Standards Committee (ASC) - [ ] The Certified Public Accountants Board (CPA) > **Explanation:** Before the recommendations in the Dearing Report, the Accounting Standards Committee (ASC) was responsible for setting accounting standards. ### The creation of which council was suggested for broad oversight and reporting supervision in the Dearing Report? - [ ] The Financial Conduct Authority (FCA) - [ ] The Securities and Exchange Commission (SEC) - [x] The Financial Reporting Council (FRC) - [ ] The Internal Revenue Service (IRS) > **Explanation:** The Dearing Report recommended the creation of the Financial Reporting Council to provide broad oversight and supervision over financial reporting. ### Which aspect of accounting did the Dearing Report primarily focus on? - [ ] Audit Practices - [x] Setting of accounting standards - [ ] Tax Haven Regulations - [ ] Budgetary Controls > **Explanation:** The primary focus of the Dearing Report was on the setting of accounting standards to improve the robustness and coherence of financial reporting. ### Which of the following resulted from implementing the Dearing Report's recommendations? - [ ] Abolishment of all accounting regulations - [ ] Introduction of new tax forms - [x] Establishment of the Accounting Standards Board (ASB) - [ ] Redundant compliance committees > **Explanation:** The implementation of the Dearing Report's recommendations led to the establishment of the Accounting Standards Board (ASB) and improved the standard-setting process.

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Tuesday, August 6, 2024

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