Abstract
The paper starts with the explanation of public interest, which means to act for the interest of the public. Public interest helps managers; regulators make ethical decisions for the society. The essay then goes on to talk about the accounting policies and the decision usefulness of those accounting policies. Examples of accounting policies are the balance sheet, income statement and cash flows statement. These give investor essential ideas of how profitability and how strong its financial position is; Corporate Governance and Auditing build up the confidence of stakeholders in the firm. Lastly, it talks about the amendments to the Australian Conceptual framework reduced the number of users in financial reports. The amendment to the framework results in the creation of more decision useful information for all the users of financial statements.
Intro
The notion of public interest refers to the interest of the society as a whole; when it comes to decisions making, decision makers should act for the best interest of the public but not for themselves. Public interest is an ethical term, it is very critical to know its importance and consider it when making decisions. As there are so many accounting policies in a financial report, investors can take advantage of those accounting policies for their decision usefulness because those accounting policies are there to protect the stakeholders. The paper then talks about the amendments to the Conceptual Framework as it reduced
It is an important function of any organisation to regulate the external financial reporting. The legislation that governs the external financial reporting is Financial reporting act 2013 (FRA) and The companies act 1993 (Deegan & Samkin, 2013). The Regulation is required to safeguard the interests of those using the financial information but do not directly participate in the business. These users may be both primary and secondary. The information provided by the financial statements are used for making economic decisions by its users (NZASB, 2016a). The regulation of external financial reporting does not only help the external users
Fair value measurement is one of the models which provide guidance on how entities should determine the fair value of financial instruments for reporting purposes. This paper discusses the Financial Accounting Standards Board (FASB) Exposure Draft issued on December 3, 2015 which proposed amendments to Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements. The paper analyzes some of the key points of the exposure draft, among other things, the history and development the concept of fair value management, the necessity of the amendments to the topic, the provisions and conceptual framework of the fair value measurement. The paper also compares and contrasts the FASB Topic 820 formerly known as to the International Accounting Standards (ISA) No. 13 of the International Financial Reporting (IFRS). Finally, the paper concludes on the response to the exposure draft.
The purpose of this paper is to define accounting, and identify the four basic financial statements. The paper also explains how the different financial statements are interrelated to each other and why they are useful to managers, investors, creditors, and employees.
External auditors play important roles in delivering credibility of public financial statements to stakeholders outside of the audited firms (The Institute of Chartered Accountants in Australia, 2008). Published financial statements can be used by stakeholders as a basis for evaluating the financial position of firms, analyzing the performance of management, or making investment decisions (International Organization of Securities Commissions, 2002). Published financial statements will also be used by institutions such as rating agencies to decide the worthiness of the firms, and by banks, to decide the amount of loans that banks are willing to lend to (International Organization of Securities Commissions, 2002). Thus, the public is significantly influenced by the examined financial statements by external auditors (International Organization of Securities Commissions, 2002).
The study of Gowthorpe and Amat (2005) illustrated two different types of behavior of the preparers of financial statements. To demonstrate the manipulative behavior of preparers of financial statement, the researchers used the accounting regulation in the USA and Spanish economy. The research demonstrated the weaknesses of U.S. standards in relation with a preparer lobby. Major corporations challenge regulators by insistent their interests. Consequently, the regulation attempts to mediate and compromising between the regulator and the preparer of financial statements (p. 61). Unfortunately, the interests of financial statement users are not taken into consideration. Moreover, practices of macro- and micromanipulations do not reflect the financial user’ needs. The main goal of financial statements is to deliver the useful information to investors. However, bargained accounting regulation is unable to fulfil the key objective of financial statements (pp. 62-63). It leads to the conclusion that the accounting at macro- and micro levels is ethically questionable. Business ethics should demonstrate a high quality of the individual. Preparers of financial statements exercise the manipulative behavior through the amoral arguments and no obligation for the unethical actions. The financial misrepresentation destroys the shareholders’ income, economic activity in the country, and the public trust.
The most important thing to any company’s stakeholders is high-quality reporting of its financial statements. Investors, for instance, need to know the truth about a company in order to make an informed decision on whether to make private investment, buy stock or bonds. However, for stakeholders to get the truth about a company, they need to read and understand management’s discussion and analysis, the president’s letter, the notes, as well as the financial statements. Conversely, financial statements must be accompanied with disclosures to prevent them from misleading the stakeholders.
As the complexity of our financial economy develops it is important that our accounting standards progress in accordance. Accounting is very important to the development of the global and local economies. Accounting is basically the gathering, summarizing and presenting of financial information of an entity to interested internal, external and possible investors. This information should be presented in a non-bias way so that other people are able understand.
In this report I will be describing how legislation and accounting concepts, could affect a business company’s accounting policies. I will also be talking what Acts contain, concepts and their importance, and also accounting policies. I will be supporting my work with examples.
Secondly, the claim made by ‘free market’ perspective to treat accounting information as other normal goods should be rejected because accounting information are unlike normal goods such as bread or house. It is a public good because the use of it by one investor does not prevent the usage of others (Hendriksen & Breda 1992, p.247). As non-investors have right to use the accounting information such as income statement and balance sheet as much as investors, investors will not agree to pay for the financial reports because others will become free-rider; thus, this prevent the function of normal pricing system of accounting information. As no income is received by producers of financial reports, they will not willing to produce it or will underproduce it so ‘free-market’ perspective is not applicable. Under this circumstance, Demski and Feltham (cited in Deegan 2009, p.65) states that for public good like accounting information, a more collective approach to its production is more desirable. This can be achieved by legislatively regulating the productions of accounting information so companies will produce the accounting information to meet the demands of external users and thus ensuring efficient capital market.
Charlie Munger once stated, “You have to know accounting. It’s the language of practical business life.” This statement emphasizes that accounting has become the center of the business world. With the world now being focused around businesses and the idea of how to make the next dollar it’s obvious that the accounting field is rapidly becoming the most influential field in the world today. With these occurrences comes regulation, and when I say regulation I mean stiff government regulations on how financial reporting is done. There are many theories as to why there is an increase in accounting regulations. One is the emphasis on the accuracy of accounting period, another being the development of ethical codes being promoted in college
Ethical and legal obligations apply to all members of society. As one in society, the obligation to act in an ethical, law abiding manner on a daily basis is vital to the integrity of daily life. Many professions have their own code of ethics. Financial reporting is not exempt from such ethical and legal standards. One’s lively hood depends on decisions made in the business world. Business transactions are done daily and can impact one’s economic stability. Trust is placed in the hands of corporate America and an obligation of financial reporting to reveal a complete honest and legal picture of an entity’s accounting practices is important in attaining trust. This paper will discuss the obligations of
In this paper our objective is to understand the concept and theories of accounting. The paper explores public interest theory, private investment theory and regulator capture theory. After this our
This essay will begin to look at the main financial statements used by decision makers in businesses today. This essay will go into detail about the income statement and statement of financial position and whether these two statements provide decision makers with their financial information adequately. This essay will also include the various advantages and disadvantages of each financial statement as well as describing whom the decision makers are and why financial statements are important to them. A conclusion will be present at the end of this essay to demonstrate an overall view of whether financial statements are beneficial to decision makers.
An important function of the accounting field is to provide external users of financial statements with assurance that the financial information being presented is both reliable and accurate. This basic function of accounting is so important that there is an entire field of experts, called auditors, dedicated to assuring its proper performance. Throughout history there have been many instances in which the basic equilibrium between an institution and current/potential investor has been threatened due to a lack of accountability and trust between the two parties. This issue has been the catalyst for many discussions regarding the proper procedures a firm should follow in order to provide
A company prepares financial statement to provide information about its financial position and performance. This information is in turn used by a wide range of stakeholders (such as investors, banks, customers, suppliers etc) in making economic decisions with respect to respective economic interest in the company. Typically, in terms of ownership by investment in shares of the company, shareholders though own the company but do not manage it. Therefore, the shareholder and other such stakeholders to get comfort in taking sound decision need independent assurance from the auditors that the financial statements reflect true and fair view of the company affairs in all material respects. Hence, in order to enhance the level of