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
- Greater Transparency: Following the implementation of the Dearing Report, UK companies experienced a shift towards more transparent and consistent financial reporting standards.
- 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.
Related Terms
- 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
- Institute of Chartered Accountants of England and Wales (ICAEW) Dearing Retrospective
- Accounting Standards Board History
- The UK’s Financial Reporting Council (FRC)
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
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