The Need for Regulation in Financial Reporting

The Need for Regulation in Financial Reporting

Discuss:

Since 1990 the Accounting Standards Board has produced Financial

Reporting Standards (FRSs) It has been performing a very important

role in the economics market as the published accounts are the

essential sources of information about the organizationsÂ’ performance

which is available of the both internal and external user group in

large organizations.

l Financial Reporting Regulations in UK

Regulators that establish requirements for the reporting of financial

results have recently issued several new initiatives targeted at the

practices of many firms. The creation of regulations for financial

reporting in the UK combine both legislative authority and the work of

private organizations. The issuing organizations and their

responsibilities are discussed below and represented in Table 1. The

UK Companies Act of 1985, and amended in 1989, requires firms to

provide financial statements that comply with 'accounting standards'

and disclose any departures from those standards along with the

accompanying reasons. Departures should only be made when they are

necessary to provide a 'true and fair view' of the underlying

transactions of the firm. In 1990, a system for developing standards

was created which included an independent standard-setting board and

an oversight board, the Accounting Standards Board (ASB) and the

Financial Reporting Council (FRC), respectively. Similar to the US

structure, the ASB also has a separate branch that targets the most

recent accounting concerns called the Urgent Issues Task Force (UITF).

The financial reporting regulations set by the ASB extends to all

limited liability companies, not just those that are publicly traded.

Enforcement of accounting regulation in the UK is governed by the

FRC's Financial Reporting Review Panel and the Department of Trade and

Industry. The Review Panel is empowered by the Companies Act to go to

the courts to have a firm revise its financial reports, if necessary.

United Kingdom

Legislative authority to regulate accounting standards

Companies Act of 1985, amended by Companies Act of 1989

Private, independent standard-setting board

Accounting Standards Board (ASB) guided by the Financial Reporting

Council (FRC)

Division of standard-setting board charged with addressing current

topics

Urgent I...

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the period are from cash sales. Both the EITF and UITF call for

disclosure in the notes to the financial statements of barter

transactions recorded in current revenues and other barter

transactions that were not recorded. Therefore, fewer barter

transactions can be recorded as revenues and investors must be clearly

informed about the barter transactions.

l Other sources of regulation in the UK

Accounting standards together with the companies Acts 1985 and 1989

contain most of the regulations governing company financial reporting

in the UK. However, some companies must also comply with regulations

laid down in other legislation. Thus, companies must comply with the

accounting requirements set out in the International Stock ExchangeÂ’s

Continuing Obligations in order to help their shares to be listed on

the International Stock Exchange of the UK and Republic of Ireland,

Summary

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From all the above , we can see that the importance of the regulations

of finance reporting and it has be consummating constantly as

required.

Bibliography:

www.gsk.org

Financial Accounting Second Edition (John Arnold, Tony Hope, Alan

South Worth, Linda Kirkham)