Arguments for Regulating Financial Reporting

Arguments for Regulating Financial Reporting Acoording to Leuz and Verrecchia (2000) the accounting literature presents proof that the quality of accounting has economic consequences for e.g. costs of capital , efficiency of capital assignment (Bushman et al. 2006)etc. Land and Lang (2002) in their research mentioned that economic changes also have homogeneous consequences by stating that the quality of accounting has improved globally since 1990s. Land and Lang (2002) also say that the reason for the advancement in the quality of accounting is primarily due to globalisation and visualization of international accounting consensus. The argument proposed by the accounting theory is that the main aim of financial reporting is to reduce information asymmetry between managers and owners and other stakeholders contracting with the company (Watts, 1977; Ball, 2001). Favouring this notion Frankel and Li (2004) states that financial reporting decreases information asymmetry by disclosing relevant and timely information. Standard setting is a form of regulation which lays down generally accepted accounting principles (GAAP) (Scott, 2003, p. 9). Also accounting standards for listed companies in the European Union are promulgated by the International Accounting Standards Board (IASB). This report answers this question that whether or not we need this kind of regulation of financial reporting. What is Financial Reporting? To answer the report question, firstly, there is a need to answer the questions like what is financial reporting, who are the users of financial reports and how is financial reporting regulated and what are the bodies responsible for regulating the financial reporting. By answering these questions a better understanding of financial reporting will be achieved and which will ultimately aid in answering the report questions. Financial reporting enables an organization to communicate information about its performance externally (Atrill et al. 2005). So, financial reports provide summarized information about an organizations transactions over a specific time period to external decision makers. (e.g. Investors). The users of financial reports are employees, trade unions, government, creditors, lenders, customers, shareholders and investment analyst (Elloit et al. 2006). The needs of these various users of financial reports can be completely different. However, the main emphasis is put on the most usable statements like balance sheet, income statement and cash flow statement. The Accounting standard boards (ASB) which is responsible for setting and issuing accounting standards, the ASB is part of a broader structure including the Financial Reporting Council, the review panel and the Urgent Issues Task Force (UITF). The Financial reporting Council (FRC) is the body charged with the broad overview of the standard setting system. Although the FRC oversees the process of producing accounting standards, it has no input into the detailed rules. Conversely the principle sources of such regulation are The Law and the Accountancy Profession. The Law consists of certain Acts. Much of the legislation governing the UKs preparation of accounts is personified in the companies Act 1985 and companies Act 1989. They are mainly concerned with the accounts of limited liability companies. These Acts state that all financial statements constructed under the Act must present a true and fair view. The Act also deals mainly with minimum disclosure requirements and is foremost concerned with the protection of shareholders and creditors. It provides a framework for general disclosure by requiring that certain financial statements such as the profit and loss accounts and the balance sheet, should be prepared and presented to the shareholders and requires the specific disclosure of certain items such as depreciation and so on. These disclosure requirements resolve some of the problems associated with the asymmetry of information between the directors and some user groups. They also enable user groups to compare the level of their inducemen ts with those received by the other groups. The Act also requires that the directors not only present the financial statements to the shareholders each year but also that independent auditors are appointed to examine the financial statements and report their findings to the shareholders. The law addresses the problem of information asymmetry by requiring the disclosure of certain key items of interest to user groups. The Accountancy Profession also recommend the same but in this role as regulator. The accountancy profession is more influential in achieving a significant increase in the comparability of financial statements. Whereas the law provides the general framework for what is to be accounted for in the financial reports, the accountancy profession provides detailed rules in the form of accounting standards about how items and transactions should be accounted for. The two main regulatory bodies of financial reporting are The Law and the Accounting Profession with the Accounting Standards Board usually known as ASB (Elliot et al. 2008). In UK, most of the legislation related to the publishing of accounts is embodied in the Companies Act 1985 and 1989. The Companies Act 1989 is the main frame which the companies and accountants have to follow. All the financial statement drawn up under the act 1989 must present a true and fair view and its function is to protect all the users of the financial reports and statements. The second and the most important regulatory body is the accounting profession. The standard setters should be aware of the information needed by all users of financial reports and should know the impact and the outcome of a different accounting method on the needs of those users. The standard setters should also be able to resolve the conflicts which exist between the needs of different users. So, they have to find an alternative wa y which best satisfy user needs and this could be achieved by choosing the improvement of the social welfare instead of welfare of individuals. We know that Accounting Standards Board is the main accounting standard setter. Because the ASB is composed of professional accountants, they may be unfamiliar with the user needs. So , when there is a need for a change in accounting standard the ASB prepare and publish a draft standard called the FRED (Financial Reporting Exposure Draft). After the publishing of these drafts the comments from the public is invited and in the light of these comments the FRED is changed (or unchanged). Now the FREDs are issued as FRS (Financial Reporting Standard). The main disadvantage of this system is the ASB members are unfamiliar with the different user needs and the comments from the general public may not be equally represented. There are four things that standards in financial reporting supply people using it. The first one is Comparability; financial statements must allow people to compare one company with another one and evaluate the managements performance without spending time and money adjusting them to a common format and common accounting treatments. It is essential that users of financial reports or investment decision makers be supplied with relevant and standard financial reports which have been regulated and hence standardized. The second thing that standards and regulations supply is called Credibility. Because all this standards and regulations exist accountants have to treat every company in the same way. If the accountancy profession permitted companies experiencing similar events to produce financial reports that disclosed markedly different results simply because of a freedom to select different accounting policies they would lose all of their credibility. So, the standards should be compos ed of rigid rules and should not be broken. The third thing is Influence that means, setting up the standards has encouraged a constructive appraisal of the policies being proposed for individual reporting problems and has been a stimulus for the development of a conceptual framework. The last thing that the standards have to supply is discipline. Companies left to their own devises without the need to obey standards will eventually be disciplined by the financial markets. But in the short run investors in such companies may suffer loss. The Financial Reporting Council is aware of the need to impose discipline because most of the company failures in recent years are because of obscure financial reporting. Why should the Accounting Standards set? As we argued before, an important role of the regulations is to increase the comparability of accounts by limiting the choice of alternative accounting methods and to supply standardized accounts. This standardization can be achieved only by uniform accounting practice. If all accounti ng methods were standardized, two organizations which began the year with same balance sheets and which made the same transactions during the year, they would report the same balance sheets and the same profit and loss account at the end of the year. In addition to these advantages of regulations in financial reporting, there are also some more useful functions. Regulations can help to reduce the influence of personal biases and political pressures on accounting judgments. They can increase the level of user confidence in, and understanding of, financial reporting by clarifying the basis on which all accounts are prepared and presented. Finally, they can provide a frame of reference for resolving accounting problems which are not mentioned in legislation or accounting standards. As we argued earlier although the regulations in financial reports have very advantages it has many disadvantages too; One if these disadvantages is the Adverse Allocative Effects, this could occur if the AS B did not take into account of the economic consequences of the new standard or regulation they have issued. For example, additional costs could be imposed on preparers of accounts and suboptimal managerial decisions might be taken to avoid any reduction in earning or net assets. Consensus-seeking can be another disadvantage and this means the issuing of standards that are over-influenced by those with easiest access to the standard-setters. Most of the time this could happen with complex subjects. Standard Overload is composed of a number of statements which creates the most important disadvantages of standards. Some of them are; 1. There is more than one standard-setter body so, as well as it becomes more difficult to follow the new changes, the accountants are becoming so regulated that it becomes very difficult to use his/her accounting profession, to make judgments. 2. There are too many standards and regulations, so in the long run, they restrict the development of accounting profession by discouraging the accountants from experimenting new ways of recording transactions. 3. Some points are too detailed and some of them are not sufficiently detailed so, makes it hard to obey. 4. Standards are for general-purpose and sometimes they fail to respond to users and the firms needs. For example, a company which wants to attract investment finance can not make the necessary judgment of how much information is necessary and what form it need take so, it couldnt take the actions necessary to attract investors and may bankrupt. Some of the standards are lack of a conceptual framework this means they havent got a clear defensible logic and the rules tend to be rather arbitrary. This causes the standards to lose its credibility and acceptability.

College is worth it Essay

Having a higher education has various benefits. A person’s chances of being employed are higher, they will earn more money than if they had a blue collar job, and most importantly it will teach them how to live. They will learn â€Å"how to be an informed and involved citizen, how to communicate effectively, how to understand other cultures and peoples, and how to think and reflect. For many students, college is a time of personal growth and social development-a chance to make friends, get to know people from different backgrounds, and explore new ideas and activities† (Graff, Birkenstein, Durst 177). Paying for college can be really stressing, both physically and emotionally. People will have to struggle with loans, financial aid, and possibly having multiple jobs. Despite the difficulties of attending college, it will be worth it and benefit you greatly in the end. In elementary school, most of you must have been asked what your dream job was. Your answer was most likely a fireman, a teacher, a superhero, or a singer, right? But as the years went by, you probably changed your mind, because you began to realize that people cannot fly, your voice was not the greatest or there was no way you can deal with annoying kids and not even get paid enough for it. By your senior year in high school you should have already had an idea of what you wanted to be, or what major you wanted to study at least. The majority of high school graduates will attend college, and if they don’t they will go straight into the workforce, either because their parents cannot afford college, or they simply do not like school, or join the Navy or the Army for that same reason of disliking school and they find it easy because recruiters make it sound that way. Some high school students start working and when they see the amount of money they are getting, they start to believe that maybe they don’t even have to go to college. They might just live well off of their blue-collar job earnings. What they do not realize is that their parents are most likely not going to want them living at home forever and if they move out to have their own place, all the money they earn will no longer go to just gas and food. They will now have bills to pay. They might be capable to cope with everything if they have a full-time good paying job or if they have two or more jobs. They might think that their friends going to college have a part-time job and are struggling trying to pay for tuition, books, and rent. What they don’t think of though, is the future. They do not realize that a few years from now, their friends will be college graduates, either with an Associate’s degree or a Bachelor’s degree. Even though it might take them a while to find a job, when they do, they will be earning twice as much money than the person who chose not to go to school. Many high school graduates are naive enough to believe that the military or whatever they get into is going to help them out with college when they get back home. It is disturbing to know that many young people go out to fight for their country and when they come back they are disappointed to find out that everything they did was not even worth it. They come back as changed people, and not always for the better. Some who actually get to see combat, come back mentally ill or even missing body parts. Their lives might never be the same after everything they have seen and been through. On top of that, they try coming back to college, and ask about the â€Å"help† they were going to receive, and they end up getting no aid. Afterwards there they are struggling to get their veteran benefits, trying to be someone bigger and better in life. In today’s economy, lack of a college education greatly limits opportunities. Basically the longer people stay in school, the more likely they are to have a job. College graduates are not only more likely to have a job but have a much better paying job. The unemployment rate for individuals who hold a Bachelor’s degree has always been about half the unemployment rate of individuals who hold a simple high-school diploma. â€Å"During a fourty-year full-time working life, the median earnings of bachelor’s degree recipients without an advanced degree are 65% higher than the median earnings of high school graduates† (Baum, Ma, Payea). Wilson claims that â€Å"a student who graduates with $20,000 in debt should be able to make at least that amount in extra earnings in one to two years’ time, she calculates, simply by having earned a college diploma† (260). People with a higher education also seem to be more satisfied in their jobs than people who only have a high school diploma. â€Å"The percentage of workers ages thirty to forty-five who report being very satisfied with their work ranges from 42% of those with less than a high-school diploma and 51% of those with a bachelor’s degree or higher† (Baum, Ma, Payea). You can gain self-confidence after having obtained a higher education. You will realize that you really are capable of learning at a high level. â€Å"Having the higher education will have prepared you to contribute to the industry you have chosen to get into. If you have higher education in a field that you are interested in, you will have a better chance of getting a job that best suits you and your abilities. This can be a very rewarding thing because you will be able to more easily find work which involves you doing something that is interesting for you, and something that you enjoy doing† (Benefits of Getting a Higher Education). Without the higher education, you will have to limit yourself to what you are qualified for. Not only does having a higher education improve your self-confidence, but your health as well. College graduates tend to have better health. â€Å"A 2006 study published by the Carnegie Mellon University Psychology department found that college degree holders have lower levels of cortisol, a stress hormone, compared to people with less education† (Hardy). They are also less likely to be out of shape, end up living on the streets, in jail, be smokers, or rely on government programs. â€Å"In 2012, only 8% of individuals with at least a bachelor’s degree smoked, compared to 25% of high school graduates and of those without a high school diploma† (Baum, Ma, Payea). The poverty rate for an individual with a bachelor’s degree is about one-third of the poverty rate for an individual with a high school diploma. â€Å"Nearly 70% of college grads had employer-provided health insurance, while only 50% of high school graduates had that benefit according to a 2008 report by the College Board†(Hardy). Works Cited â€Å"Benefits of Getting a Higher Education† . N. p.. Web. 23 Oct 2013. . Hardy, M.. N. p.. Web. 23 Oct 2013. . Graff, Gerald, Birkenstein, Cathy, Durst, Russel. They Say, I Say (with readings). New York. London. W. W. Norton & Company Inc. 2006. Print Baum, Sandy, Ma, Jennifer, Payea, Kathleen. Education Pays 2013. 2013. The College Board. Wilson, Robin. â€Å"A Lifetime of Student Debt? Not likely. † They Say, I Say (with readings). Graff, Gerald, Birkenstein, Cathy, Durst, Russel. New York. London. W. W. Norton & Company Inc. 2006. Pages 256-273.

Charles Dickens presentation Essay

Do you feel that Charles Dickens presentation of Joe Gargery makes him seem on balance a foolish person or someone worthy of our respect? In Great Expectations, Joe Gargery comes into the novel many times. Sometimes he is portrayed as a very foolish person but other times he actually is quite clever and worthy of our respect. At the beginning of the novel, he seems foolish in the sense that he is a very simple man and does nothing to hide it. When Pip is reading him a letter, Joe remarks †Why, here’s a J,’ said Joe, ‘ and a O equal to anythink! Here’s a J and a O, Pip, and a J-O, Joe. † Pip carries on by saying ‘ I had never heard Joe read aloud to any great extent than this monosyllable, and I had observed at church last Sunday when I accidentally held our Prayer-Book upside down, that it seemed to suit his convenience quite as well as if it had been all right. ‘ There are many more examples of his foolishness but there is one important point that must be included to understand why Joe puts up with Mrs Joe’s nagging the whole time. He tells Pip about how his father beat his mother and him constantly: ‘ and he hammered at me with such a wigour only to be equalled by the wigour with which he didn’t hammer at his anwil. – You’re a listening and understanding, Pip? ‘ He then reveals that Mrs Joe doesn’t like scholarly people in her house ‘And she ain’t over partial to having scholars on the premises’ Joe continued, ‘ and in partickler would not be over partial to my being a scholar, for fear as I might rise. Like a sort of rebel, don’t you see? ‘ In this there is a clear sign that Joe doesn’t want any disharmony in his house and he doesn’t want to treat his wife like his dad treated his mum. So for this reason he puts up with Mrs Joe ‘knocking his head for a little while against the wall behind him’ when he steps out of line. For this reason, it seems we must respect him as someone who learns not from his mistakes, but other people’s. There are times in the novel, where Joe seems to be acting really stupidly but is in fact being proud. The first time this crops up is when Joe and Pip go to Satis House to talk to Miss Havisham. Joe, to Pip’s embarrassment, refuses to talk to Pip as though Miss Havisham is not there ‘Pip,’ returned Joe, cutting me short as if he was hurt, ‘which I meantersay that were not a question requiring a answer betwixt yourself and me, and which you know the answer to be full well No. You know it to be No, Pip, and wherefore should I say it? ‘ Miss Havisham has just asked Joe a question and it is strange that he addresses Pip instead. Pip after becoming a gentleman, is very snobbish and looks down on Joe. For this reason Joe tries to act very upper class and tries not to embarrass Pip in front of his friends. ‘Since you are so kind as make chice of coffee, I will not run contrairy to your own opinions. ‘ He calls Pip ‘Sir’ many times and at one point Pip says ‘Joe,’ I interrupted, pettishly, ‘how can you call me Sir? ‘ However even after this scene which Joe looks foolish, he actually regains his dignity; ‘Joe looked at me for a single instant with something faintly like reproach. Utterly preposterous as his cravat was, and as his collars were, I was conscious of a sort of dignity in the look. ‘ Here we have two contrasting statements. Pip tells us that Joe looks extremely foolish in his cravat and collar but under the foolishness is someone who is extremely dignified. Not many people are like that especially when their ‘son’, has just rebuked them for addressing them wrongly. The next time Joe’s dignity really shines through is when he leaves Pip on page 222. He knows he looks stupid in the clothes because and says so ‘I’m wrong in these clothes. I’m wrong out of the forge, the kitchen, or off th’ meshes†¦ I’m awfully dull, but I hope I’ve beat out something nigh the rights of this at last’ The terrible thing is, is that Joe knows Pip looks down on him and is ashamed of him. He says ‘ You won’t find half so much fault in me if you think of me in my forge dress, with my hammer in my hand, or even my pipe. You won’t find half as much fault in me if, supposing as you should ever wish to see me, you come and put your head in at the forge winder†¦ ‘ He knows Pip looks down on him and is embarrassed about him, he feels sorry for Pip and blames it on himself. This is a very honourable thing to do and definitely makes us show respect for him. We see other characters from different pieces of literature placed in similar situations and act very differently and with less patience. For example Eddie Carbone in A View for the Bridge. When Pip becomes ill, due to a number of things: severe burning, a run-in with Orlick and Provis becoming captured, Joe comes to visit him and looks after him. Joe doesn’t want to fall into embarrassing Pip again. Due to Pip’s earlier disrespect towards Joe, Joe is less easy with Pip. ‘ But, imperceptibly, though I held them fast, Joe’s hold upon them began to slacken; and whereas, I wondered at this at first, I soon began to understand that the cause of it was in me, and that the fault of it was all mine. ‘ Joe has regained his dignity so instead of getting emotionally close to Pip, he draws himself away from him as soon as he senses he is getting stronger. Joe, earlier on is obviously trying to impress Pip by learning to write and Pip starts crying because he sees the pride with which Joe has written the letter to him. Pip is very lucky to have an uncle like Joe because Joe is an excellent person. On the surface he seems to be foolish but underneath he is a pure and righteous man. He always forgives Pip for whatever injustice Pip does to him. In the balance, the reasons we should respect Joe Gargery far outweigh the reasons why we should treat him like a foolish character and one that is not worthy of our respect.

Branches of Philosophy Epistemology, Metaphysics and Ethics

Philosophy is the careful study if the states of, validity, existence, and conduct. It comes from the Greek word, philosophia, which translates into â€Å"the love of wisdom†. Philosophy encompasses a vast range of topics and ever person, place, thing, and idea has its roots embedded in it. For the purpose of this paper, I will be only covering the branches of epistemology, metaphysics, and ethics. These branches serve as the building blocks for studying and teaching philosophy. While examining these building blocks, I will argue why philosophy should be studied. Everything I know was told to me by someone else and that person was also told everything that she or she knows by someone else. However, the question is how much of what I know is†¦show more content†¦The skewing can come from a variety of sources, such as someone telling a â€Å"little white lie†, someone not being able to recall details of the event, or having a personal biased that needs to be protected. This created an enigma for because I do not know whether to believe or disbelieve. How do know that this it not a â€Å"blood and circus† routine that is designed to entertain me and keep me from find out the truth about something else that would be more value to me if I only had knowledge of it? The only thing that I can be certain of is that there are three sides to a story: his side, her side, and the truth. I also cannot say with certainty that if there is an omission in the person’s story that it is intentional nor unintentional. Epistemology q uestions the black and white areas of what is to be accepted as the truth as well as the fuzzy grey areas that are not necessarily know. This makes me wonder about how I know that this person, who is telling me the story about an event, actually exists or is it that my mind is playing tricks on me. Not knowing whether or not the voice that I hear is really a real person or a phantom echo in my head is an unnerving concept. 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