History of Accounting and interesting current trends in Accounting up till 2024

Summary

This video explores the rich history of accounting from its origins in ancient Mesopotamia and Egypt around 3000 BCE to the establishment of modern standards. Key milestones include Luca Pacioli's introduction of double-entry bookkeeping in 1494, the impact of the Industrial Revolution, the formation of professional bodies like the AICPA and the IASB, the response to crises like the Enron scandal with the Sarbanes-Oxley Act, and the emergence of IFRS. The narrative culminates with the establishment of the ISSB for sustainability standards and the ongoing integration of technology in accounting practices.

Takeaways

• 📘 The origins of accounting date back to 3000 BCE in ancient Mesopotamia and Egypt, where it began as bookkeeping to track and record economic transactions using clay tablets and papyrus scrolls.
• 📖 In 1494 CE, Luca Pacioli, an Italian mathematician, published the first book on Double Entry bookkeeping, which became a foundational tool in accounting, earning him the title 'Father of Accounting'.
• 🏭 The Industrial Revolution in the 1800s brought significant changes to the business landscape, leading to the growth of corporations and increased accounting needs due to advancements in technology and manufacturing processes.
• 📜 The American Association of Public Accountants was founded in 1887, which later evolved into the modern-day American Institute of Certified Public Accountants.
• 📊 The Great Depression in the 1930s necessitated standardized accounting practices, leading to the establishment of the Securities and Exchange Commission and the Committee on Accounting Procedure to set accounting standards.
• 🏛️ In 1949, the Institute of Chartered Accountants in England and Wales was formed, providing professional guidance and oversight for accountants in the United Kingdom.
• 📈 The Financial Accounting Standards Board (FASB) was established in 1973 in the United States to replace the Committee on Accounting Procedure and assume responsibility for setting accounting standards.
• 🌐 Also in 1973, the International Accounting Standards Committee was formed to develop International Accounting Standards, which later became known as International Financial Reporting Standards (IFRS).
• 🚨 The Enron Scandal in 2001 exposed major accounting irregularities and corporate fraud, prompting increased scrutiny and calls for stronger accounting regulations and ethics.
• 📋 In response to the Enron Scandal, the Sarbanes-Oxley Act was enacted in 2002 in the United States to enhance corporate governance, internal controls, and financial reporting transparency.
• 🌍 In 2005, the International Accounting Standards Board replaced the International Accounting Standards Committee and introduced IFRS as a globally accepted set of accounting standards.
• 💼 The global financial crisis of 2007 had significant implications, revealing weaknesses in the accounting treatment of financial instruments, particularly regarding the recognition of impairments and fair value measurements.
• 📝 In 2014, IFRS 9 was issued to address the deficiencies revealed by the 2007 financial crisis and to strengthen accounting and reporting standards.
• 🌱 The rise in the need for companies to disclose information about their climate and sustainability-related activities led to the formation of the International Sustainability Standards Board (ISSB) in 2021.
• 📢 On June 26, 2023, the ISSB issued IFRS S1 for general sustainability-related disclosures and IFRS S2 for climate-related disclosures, set to become effective from 2024 onwards.
• 🔧 Accounting continues to evolve with technological advancements such as artificial intelligence, automation, and blockchain in financial reporting and auditing processes.

Q & A

What is the origin of accounting according to the video?

Accounting is said to have originated around 3000 BCE in ancient Mesopotamia and Egypt as bookkeeping to track and record economic transactions.

Who is known as the 'Father of Accounting' and why?

Luca Pacioli is known as the 'Father of Accounting' because he published the first book on Double Entry bookkeeping in 1494 CE, which became an essential tool in accounting.

What significant changes did the Industrial Revolution bring to accounting?

The Industrial Revolution brought advancements in technology and manufacturing processes, leading to the growth of corporations and increased accounting needs due to the change in the business landscape.

When was the American Institute of Certified Public Accountants (AICPA) founded and what was its precursor?

The AICPA was founded in 1887, with its precursor being the American Association of Public Accountants.

What event led to the establishment of the Securities and Exchange Commission (SEC) in the United States?

The Great Depression in the 1930s led to the need for standardized accounting practices, resulting in the establishment of the SEC and the Committee on Accounting Procedure.

What is the role of the Financial Accounting Standards Board (FASB)?

The FASB was established in 1973 to replace the Committee on Accounting Procedure and to assume responsibility for setting accounting standards in the United States.

What was the impact of the Enron Scandal on accounting practices?

The Enron Scandal in 2001 revealed major accounting irregularities and corporate fraud, leading to increased scrutiny and calls for stronger accounting regulations and ethics.

What legislation was enacted in the United States in response to the Enron Scandal?

The Sarbanes-Oxley Act was enacted in 2002 to enhance corporate governance, internal controls, and financial reporting transparency.

What is the International Sustainability Standards Board (ISSB) and when was it formed?

The ISSB was announced in 2021 by the IFRS Foundation to develop and issue sustainability-related accounting standards, acting as a sister board to the IASB.

What are the two IFRS sustainability standards issued by the ISSB on June 26, 2023?

The ISSB issued IFRS S1 titled 'General sustainability-related disclosures' and IFRS S2 titled 'Climate-related disclosures' to become effective from 2024 onwards.

How is accounting evolving with technological advancements?

Accounting is evolving with the use of artificial intelligence, automation, and blockchain in financial reporting and auditing processes.