Need for Regulation in Financial Accounting and Inclusion of Human Capital and Intellectual Property in Balance Sheet

Q1: Why do you think financial accounting should be regulated? Would your
answer be different if the company were not a public company but the
corner news agency?
Solution: It is very much necessary to control the financial accounting
because there are vast users to the financial reporting which may include
investors, public, company employee, government, advisory group and the
other shareholders. Different users to the financial statements will interpret
in a different manner and if these users prepare financial report it will be
prepared in a diverse way which could meet up their requirement. If this will
be scenario than different users will interpret the financial statements
accordingly. There are also international differences in financial accounting
and vary from country to country ,as different accounting policies are
followed in every country and also the difference between public and private
domain. (Anon., n.d.)
There is an urgent need for financial accounting regulation as different
country follow different accounting standards and policies which lead to
preparation of different financial reports. The main objective of regulation of
accounts is to provide accurate records, clear identification of assets and
liabilities of the company, clearly analysis of investment of the company and
to provide a transparency to the shareholders.
Further, regulation of financial accounting reduces chances of cooking up of
accounts, accounting frauds, Tax evasion, enhancing transparency,
streamlining of global accounts, safeguard of public interests, increases
credibility and reliability of management estimates and auditors opinion. The
leading example of lack of regulation or insufficient regulation is Enron Scam
which lead to great accounting reforms. (Anon., n.d.)
However, financial accounting regulation has some drawbacks in the form of
time burden, documentation, cost bearing which are passed on to ultimate