4 Whilst acknowledging the importance of high quality corporate reporting, the recommendat
4 Whilst acknowledging the importance of high quality corporate reporting, the recommendations to improve it are
sometimes questioned on the basis that the marketplace for capital can determine the nature and quality of corporate
reporting. It could be argued that additional accounting and disclosure standards would only distort a market
mechanism that already works well and would add costs to the reporting mechanism, with no apparent benefit. It
could be said that accounting standards create costly, inefficient, and unnecessary regulation. It could be argued that
increased disclosure reduces risks and offers a degree of protection to users. However, increased disclosure has several
costs to the preparer of financial statements.
Required:
(a) Explain why accounting standards are needed to help the market mechanism work effectively for the benefit
of preparers and users of corporate reports. (9 marks)
(a) It could be argued that the marketplace already offers powerful incentives for high-quality reporting as it rewards such by
easing or restricting access to capital or raising or lowering the cost of borrowing capital depending on the quality of the entity’s
reports. However, accounting standards play an important role in helping the market mechanism work effectively. Accounting
standards are needed because they:
– Promote a common understanding of the nature of corporate performance and this facilitates any negotiations between
users and companies about the content of financial statements. For example, many loan agreements specify that a
company provide the lender with financial statements prepared in accordance with generally accepted accounting
principles or International Financial Reporting Standards. Both the company and the lender understand the terms and
are comfortable that statements prepared according to those standards will meet certain information needs. Without
standards, the statements would be less useful to the lender, and the company and the lender would have to agree to
create some form. of acceptable standards which would be inefficient and less effective.
– Assist neutral and unbiased reporting. Companies may wish to portray their past performance and future prospects in
the most favourable light. Users are aware of this potential bias and are sceptical about the information they receive.
Standards build credibility and confidence in the capital marketplace to the benefit of both users and companies.
– Improve the comparability of information across companies and national boundaries. Without standards, there would be
little basis to compare one company with others across national boundaries which is a key feature of relevant
information.
– Create credibility in financial statements. Auditors verify that information is reported in accordance with standards and
this creates public confidence in financial statements
– Facilitate consistency of information by producing data in accordance with an agreed conceptual framework. A consistent
approach to the development and presentation of information assists users in accessing information in an efficient
manner and facilitates decision-making.
求译China Merchants BankAirPlus International and C 其他 2020-05-16 …
帮忙翻译The Role of Identity Salience in the Effects 英语 2020-05-16 …
(c) The Shirtmaster division and Corporate Clothin 财会类考试 2020-05-21 …
4 The transition to International Financial Report 财会类考试 2020-05-21 …
(b) Discuss how management’s judgement and the fin 财会类考试 2020-05-21 …
4 Whilst acknowledging the importance of high qual 财会类考试 2020-05-21 …
(c) Construct the arguments in favour of Professor 财会类考试 2020-05-21 …
(ii) Illustrate the benefit of revising the corpor 财会类考试 2020-05-21 …
(d) Discuss the professional accountant’s liabilit 财会类考试 2020-05-21 …
For security reasons, the network administrator ne 计算机类考试 2020-05-31 …