Essay on The Need for Regulation in Financial Reporting

Essay on The Need for Regulation in Financial Reporting

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The Need for Regulation in Financial Reporting


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

Urgent I...

... middle of paper ...

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,


From all the above , we can see that the importance of the regulations
of finance reporting and it has be consummating constantly as


Financial Accounting Second Edition (John Arnold, Tony Hope, Alan
South Worth, Linda Kirkham)

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