Discuss the need for regulation in financial reporting.

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Class code:12

Student’s Name: Wang Lu (0140074)

Teacher’s Name: Ms Hsiao-Peng Fu

AC111 COURSEWORK

  1. Discuss the need for regulation in financial reporting.

Discuss:

Since 1990 the Accounting Standards Board has produced Financial Reporting Standards (FRSs),It has been performing a very important role in the economics market as the published accounts are the essential sources of information about the organizations’ performance which is available of the both internal and external user group in large organizations.

  • Financial Reporting Regulations in UK

Regulators that establish requirements for the reporting of financial results have recently issued several new initiatives targeted at the practices of many firms. The creation of regulations for financial reporting in the UK combine both legislative authority and the work of private organizations. The issuing organizations and their responsibilities are discussed below and represented in .  The UK Companies Act of 1985, and amended in 1989, requires firms to provide financial statements that comply with 'accounting standards' and disclose any departures from those standards along with the accompanying reasons. Departures should only be made when they are necessary to provide a 'true and fair view' of the underlying transactions of the firm. In 1990, a system for developing standards was created which included an independent standard-setting board and an oversight board, the Accounting Standards Board (ASB) and the Financial Reporting Council (FRC), respectively. Similar to the US structure, the ASB also has a separate branch that targets the most recent accounting concerns called the Urgent Issues Task Force (UITF). The financial reporting regulations set by the ASB extends to all limited liability companies, not just those that are publicly traded. Enforcement of accounting regulation in the UK is governed by the FRC's Financial Reporting Review Panel and the Department of Trade and Industry. The Review Panel is empowered by the Companies Act to go to the courts to have a firm revise its financial reports, if necessary.

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Table 1: Financial Reporting Authority in the UK

There are several rules to constrain the financial reporting. Because of information Asymmetry and comparability that management should not be given complete freedom to determine what accounting information should be included in the published financial statements.  

In that case, managers do not have access to information about all aspects of the organization’s activites, which also helps the user accounts to compare the performance of an organization either through time or with the performance of other organizations.

The external users of accounts would be unlikely to ...

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