Regulation Flashcards
Definition
Deegan and Umerman, 2011
Rules developed by an independent body, given the power to govern how financial statements are prepared
Example of company bending regulation rules
Edman, 2011
American Airlines- lease 362 planes using 2/3 operating leases as off balance sheet finance
Lessor responsible for tax and insurance
Financial reporting council
Companies act, 2006
Public and private companies must produce statements in a true and fair way
Stock exchange U.K.
Must provide statements 4 months after year end
Stock exchange- bankers and financial crisis quote
Salsman, 2013
‘Need isn’t a standard that a rational free market banker would abide, but backed by government, one thats backed by other people’s money.
Free market support
Hakansson, 1977
Forcing companies to disclose information can be costly by allowing competitors to take advantage of this information
Essay plan intro
Intro- regulation def- deegan and Unerman, 2011
Essay plan- pro regulation positive
link to conceptual framework- true and fair, improves comparability for stakeholders. Information is free to users for public good
Essay plan- negative regulation
Negative regulation- free riding of information. Still professional judgement- e.g Edman, 2011 American airline leases
Free market- positive
Info treated as any other good,
No regulation, private incentives for companies to release info- e.g to keep getting capital from investors
REF- hakansson, 1977- forcing companies can be costly- competitors
Essay plan- Lack of regulation
Stock market- must provide statements 4 months after year and
Manipulation in financial crisis-
Salsmon 2013, regulation promoted reckless practice- backed up by other people’s money
