Corporate Accounting: Regulations, Setting of Accounting Standards, Items of Equity, Comparative Analysis for Debt and Equity

Running head: CORPORATE ACCOUNTING
Corporate accounting
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2CORPORATE ACCOUNTING
Table of Contents
(i) Corporate regulation........................................................................................................3
(ii) Setting of accounting standard........................................................................................5
(iii) Items of equity.................................................................................................................6
(iv) Comparative analysis for debt and equity.....................................................................10
Reference..................................................................................................................................11

3CORPORATE ACCOUNTING
(i) Corporate regulation
In accounting, measurement and identification of elements included in the financial
statement and its impact on the financial status and circumstances shall be defined in the form
of standards and regulation. These regulations are accounting rules for the purpose of
financial accounting as well as reporting. These regulations mention what shall be reported
under the company accounts. Further, these provide guarantees for certain approaches, cases
and requirements those are generally taken into account while preparing the financial
statements (Malsch 2013). Apart from that these regulation assist the potential investors to
make any crucial decision regarding investment. While the accounting standards and
regulations are discussed the 1st thing comes into mind is the accounting report. In accordance
with IASC (International Accounting Standards Committee) the accounting reports are the
documents that represent the entity’s financial position and performance. The report can be
altered on the basis of the material changes in the financial position of the company (Watson
2015). In addition to this, another important aspect of regulating the reporting is accounting
framework. Conceptual framework is the fundamental system and objective that makes the
standard consistent through stating that accounting reports are based on the guidelines. Rules
are the set in accounting standard that can be formulated from the framework. However, in
case of any conflict for interpretation regulation is applied over framework. Various
advantages of regulating the financial reporting and accounting are as follows –
 Protecting the investors – regulating the accounting reporting will enhance the
investor’s confidence with regard to investment. the reason behind this is that the
investors are interested in realizing their investment and their interests are assured
through reviewing the authentic and correct information (Newberry 2015)

4CORPORATE ACCOUNTING
 Understandability – this is another advantage of regulating the financial reporting and
accounting. Regulations make it easier to creating the financial statements and
analysing the results. Further, while the financial reports are prepared as per the
regulations some assumptions are made by every entity. Once the assumptions are
realized it helps the users to understand the treatments (Gipper, Lombardi and Skinner
2013).
 Guidance – this one is another advantage for regulating the information included in
the financial reports. Preparing the reports through using the regulations is flexibility.
As the financial world is becoming more complex it is becoming more problematic to
create standardized format for entire company. Therefore, the report prepared through
following the regulations will create a standardised format (Mazhambe 2014).
However, irrespective of the above mentioned advantages, some disadvantages are
there in regulating the financial reporting and accounting those can be avoided if the
managers are allowed disclosing the information voluntarily. These disadvantages are –
 Cost involvement – using the regulation like accounting standards while preparing the
financial statements requires high costs to be complied with. Further the company is
required to change the procedures that requires large amount of financial investment
including system upgrades, employee training and labour costs. For instance, the
company require some people who will look after correct application of standards and
regulation and some people who will provide training to other employees for adopting
the regulation (Bamber and McMeeking 2016).
 Financial statement that includes the balance sheet, profit and loss statement and cash
flow statement requires following step by step process while these are prepared in
compliance with the regulation and accounting standards. However, these steps are
not required if the managers disclose the information voluntarily (Aasb.gov.au 2018).