Financial Accounting is highlighted in the lecture. There are two key points of financial accounting. Firstly, financial accounting is a process involving the collection and processing of financial information to meet the decision-making needs of parties external to an orgnisation. The other one is related to laws and accounting standards, external reporting, financial statements, values and material, independent audit opinion, overview general purpose by true and fair views, and economic decision by the users.
Although this part I have learnt in ACCg224, I still a bit confused about it, even some scare. Then I tried to talk about peers, find it more easily to understand. This chapter is around the external reporting environment, the conceptual framework of accounting and financial reporting. Main sources of external financial reporting regulations in Australia are as follow, what maintained in the tutorial. 1. the Australian Securities and Investments Commission (ASIC) Body responsible for administering corporation legislation in Australia. It is independent of state ministers or state parliaments and reports directly to the Commonwealth Parliament and the Attorney-General. 2. the Australian Accounting Standards Board (AASB)
Body charged with developing a conceptual framework for accounting practices, making and formulating accounting standards, and participating in and contributing to the development of a single set of accounting standard for worldwide use. 3. the Financial Reporting Council (FRC)
Body that oversees the activities of the AASB and the AUASB (Auditing and Assurance Standards Board). 4. the Australian Securities Exchange (ASX)
The ASX sets uniform trading rules, ethical standards and listing requirements. 5. Impact of adopting IFRS, what could be ignored.
Issued by the International Accounting Standards Board (IASB) and converted into Australian accounting standard (AASB). The other one is mainly influenced by the European Unions decision to adopt
The ‘Theories’ of Regulation: very and range between the ‘free-market perspective and the ‘pro-regulation’ perspective, what I confused at the beginning and learn about it after read text book. The ‘free-market’ perspective prefers reducing or eliminating regulation. Proponents of a free-market perspective on accounting regulation often believe that accounting information should be treated like other goods, with demand and supply forces being allowed to operate to generate an optimal supply of information about an entity. Private Economic Based Incentives is base on agency theory that all parties will assume that others will work in their own self-interest unless constrained to do this. This theory issued the conflict between managers and the debt holders.
Manager only operate business for own benefit and this is expected by shareholders and debt holders. Therefore in interest of management to enter contracts with shareholders and debt holders to constrain managers’ actions and align them with goals of the orgnisation. Orgnisations best placed to determine what information should be produced to increase the confidence of external stakeholders. However, regulation restricts the available set of accounting method. It issued certain mandated disclosures, which will be costly to the orgnisation if they enable competitors to take advantage of certain proprietary information. And the other issue is about audit report whether is credibility and reliable or not. This issue is related to the legislation and case law, such as the Cooper and Keim (1983). The case states that the auditor must be perceived to be truly independent and the accounting methods employed and the statements’ prescribed content must be sufficiently well-defined.
Market for Lemons Perspective is included in free market theory, which is quite interesting.The view being that in the absence of...