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Compare and contrast the approach of the US and UK financial regulatory bodies and comment upon the major issues and events which have shaped the regulatory environments of both countries over the last twenty years.

Extracts from this essay...

Introduction

QUESTION: Compare and contrast the approach of the US and UK financial regulatory bodies and comment upon the major issues and events which have shaped the regulatory environments of both countries over the last twenty years. ********************************************************************* Introduction This paper aims at comparing and contrasting the UK/US financial regulatory bodies in the financial accounting standard issue and application aspect. Recently we found the obvious tendency of global accounting standard convergence and this has the significant influence on both of UK and US financial regulatory environments. This convergence is also called accounting harmonisation which aims at developing a single set of high quality, global acceptance accounting standards that require transparent and comparable information in general purpose financial statements. (Nobes & Parker, 2002, pp93) In order to achieve that goal, both of UK and US move toward the International Accounting Standards at present. This paper will outline the major structure of financial regulatory systems in both two countries and then will compare the major steps that UK and US financial regulators took toward this tendency over last decades. Briefing of UK/US financial accounting systems: Both of UK/US system are more pragmatic system and have traditionally been regarded as a service function to business. This orientation towards business practices has resulted in lots of the similarities existed between UK and US system. Nobes and Parker (2002) outline some major similarities between UK/US's financial system as follow: (1) Reliance on generally accepted accounting principles Accounting under both systems are essentially based on practice and generally accepted principles. These principles have developed through long time of practice, and their development has been influenced primarily by the business and financial communities and the accounting profession. (2) Full disclosure and fair presentation In this kind of pragmatic system of accounting, they rely on criteria such as "a true and fair view" in the UK, and "fair presentation" in the USA.

Middle

(European Commission, 1995, p4) IASB was found within EU. Most of its member is from the UK accounting profession. So it is very close to and is highly influenced by UK system. 3)Process and influence of IASs application In 1995, EU commission decided to move towards IAS in order to achieve the broader international accounting harmonization and deal with their accounting problems. In 1996, EU commission announced that there aren't any significant differences between EU Accounting Directives and IASs. After that, IASB has worked in conjunction with EC in order to reduce the differences between EU Accounting Directives and IASs. In 2000, EC proposed compulsory use of IASs for the consolidated statements of listed companies by 2005. On July 2002, the European Parliament and Council released the Regulation (EC) No 1606/2002 of the application of international accounting standard (IAS Regulation) in order to harmonises the financial information presented by public listed companies in order to ensure a high degree of transparency and comparability of financial statements. In UK, EU's IASs regulation introduces important changes, which will directly influence the way in which UK's companies prepare their financial statements. For those UK companies affected, this EU's regulation means they will have to comply with accounting standards issued by IASB, instead of much of the Companies Act 1985 and the domestic accounting standards issued by the Accounting Standards Board (ASB). In this way, this regulation make IASB standards have direct legal force in UK. Recently ASB has a programme of converging domestic and IASB standards. In the future, UK standards are likely to be very similar to IASB standards in many respects, and in particular, ASB standards will only be used by non-publicly traded companies. (Source: DTI website. 2002) Unlike Accounting Directives, EU IAS Regulations have the force of law without requiring transposition into national legislation. Member States have the option of extending the application of this Regulation to unlisted companies.

Conclusion

But now they have noticed the tendency of international accounting standards convergence and start adjust itself to incorporate into the global market. And that will benefit not only US market, but also the whole worldwide! Reference: * Blake, J. Amat, O and Gowthorpe, C. (1999) International Accounting Harmonisation - A Comparison of Spain, Sweden and Austria. Accessed 3/12/2003 URL: http://econpapers.hhs.se/paper/upfupfgen/294.htm * Combarros, J.L (2000), Accounting and financial audit harmonisation in the European Union. The European Accoounting Review. July 2000, Routledge Journals. * Department of Trade and Industry (2002). INTERNATIONAL ACCOUNTING STANDARDS: CONSULTATION ON MEMBER STATE OPTIONS. Accessed 11/12/2003 Source: www.dti.gov.uk/consultations * Department of Trade and Industry(2003).UK EXTENDS USE OF INTERNATIONAL ACCOUNTING STANDARDS. Accessed 11/12/2003 http://www.dti.gov.uk/cld/pressnotice170703.pdf. * Financial Reporting Council (2000) About the FRC. Accessed 29/11/2003 http://www.frc.org.uk/about.html * Financial Services Authority (13/11/2002) Introduction to FSA. Accessed 29/11/2003 http://www.fsa.gov.uk/media_centre/what_the_fsa_is_all_about.html * International Accounting Standards Board (2000) "About Us" Accessed 10/12/2003. http://www.iasb.gov.uk * International Organization of Securities Commissions. (2000) Accessed 10/12/2003 http://www.iasc.org.uk/cmt/0001.asp?s=6881078&sc={8C5305BE-978A-474B-9DE2-81F476EAC9A7}&sd=895372229&n=3279 * Investor Relations Business. News Feature. Nov 18 2002 * Levitt, A. (1996) "The Accountant's Critical Eye." Remarks at the 24th Annual National Conference on Current SEC Developments (SEC webpage), December 10, 1996. (Extracts published in Accountancy (international edition), 119 (February 1997), p. 67.) * Livingston, P. (2002) Globalization and its impact. Financial Executive. Dec 2002. p6 * Nobes, C. & Parker, R. (2002). Comparative Internatinal Accoounting. (7th Edition). P74 * Pacter, P. (2002). Global GAAPs. Accountancy. Nov 2002. p97 * Perry,M. (2000). Politics and IT drive changes forward. Accountancy Age. 16 Nov 2000 p28 * Pitt, H. (2002). US shares common aim for one set of standards. Accountancy. November 2002. p86 * Securities and Exchange Commission (April 11, 1996)."SEC Statement Regarding International Accounting Standards". Accessed 12/12/2003. http://www.sec.gov/news/speech/speecharchive/1996/spch142.txt * Securities and Exchange Commission (1997). "Report on Promoting Global Preeminence of American Securities Markets". Accessed 12/12/2003. http://www.sec.gov/news/studies/acctgsp.htm * Tweedie, D. (2002). Going for gold. Accountancy Age. 21 Feb 2002. p7 * ZEFF, S.A (1998). THE IASC'S CORE STANDARDS: WHAT WILL THE SEC DO? Journal of Financial Statement Analysis, 10853464, Fall98, Vol. 4, Issue 1 UK vs US Current issue Page 1 of 13

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