The Regulatory Framework And The Role Of IFRS

Question 1

What is the role of a regulatory framework in the preparation of financial standards?

Answer 1

• ensure regulation of financial reporting through standards
• ensure info is reported objectively to provide relevant, reliable and faithfully represented info that enables users to make financial decisions
• provide adequate minimum level of info for users
• ensure info is comparable and consistent in the relevant economic arena
• ensure/improve transparency and credibility of financial reports, promoting users’ confidence in the financial reporting process
• regulate behaviour of companies and directors through the CG framework
• achieve desired social goals through environmental and CSR reporting

Question 2

Key objectives of financial accounting standards:

Answer 2

• improve transparency and make information reliable, relevant and easier to understand
• reduce the risk of creative accounting
• make statements of different period/entities comparable
• increase credibility of financial statements by improving the uniformity of accounting treatment between companies
• provide quality factual reports and accounting information which can be reliable upon for consistency, commonality and overall transparency

Question 3

What are the key arguments for harmonising accounting standards across the world?

Answer 3

• Make global comparisons easier
• Cross-border listing is facilitated - easier to raise funds and make investments abroad
• Multinational companies with subsidiaries in foreign countries have a common, company-wide accounting language
• Foreign companies can be more easily appraised for mergers and acquisitions
• Multinationals benefit: (1) prep of group financial statements may be easier; (2) a reduction in audit costs; (3) management control improved; (4) transfer of accounting knowledge and expertise across borders easier

Question 4

Why growing need for businesses to account for and report on environmental issues?

Answer 4

• Risk management
• Marketing advantages
• Legal needs
• Competitive advantage
• Ethics
• Compliance and accounting requirements
• Green (ethical) investors
• Employee interests
• Value-added reporting

-Integrated reporting