Corporate reporting: Audit & assurance: Services -

Running head: FINM008 CORPORATE REPORTING
FINM008 Corporate reporting
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FINM008 CORPORATE REPORTING1
Answer 1
Regulatory framework in accounting includes UK financial statements regulation. It is
considered as the set of regulations and rules for preparation of the financial statements.
Financial statements prepared as per these regulatory frameworks make it easy to compare. UK
has its own national authority for financial reporting named as Accounting Standards Board that
publishes financial reporting standards in UK (Zhang and Andrew 2014). Main legislation that
has its impact on the businesses of UK is Companies Act 2006. However, some other legislation
like EU, UK and US are also there that has impact on the accountability of UK. Number of UK
regulatory systems those are industry specific are also there to have its impact on the Main
components of this include company law, conceptual framework and international accounting
standards. Conceptual framework delivers set of the accounting principles to prepare and present
the financial statements that was introduced by IASB. It helps in generating accounting
information that satisfies the user’s needs and assists in taking decisions. It further helps in
identifying good practice at the time of preparing the accounting reports (Wagenhofer 2016).
Conceptual framework in addition points out importance of the term materiality while discussing
the qualitative characteristics. Qualitative characteristics help in making financial information
useful to the users. 2 major characteristics are faithful representation and relevance. The concept
of materiality is focused on determining importance of whether certain item is material or not.
Relevant information shall be material to have its impact on the decisions making, predicting the
future events and confirming past events. On the other hand, information represented faithfully is
useful to the users while they are free from error and misstatements (Jaggi et al. 2016). In
addition, as enhancing qualitative characteristics the accounts shall disclose the accounting
policies and must be prepared consistently that will enable the users to identify the similarities as

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well as differences and assists in understanding the same. Further, the information those are
recent as well as most up-to-date are only useful while making any decision. Different items are
considered in the financial statements and the major elements are assets, liabilities, equity,
revenues and expenses. Assets are the potential economic benefits for future period and the
entity has the right to use the same. On the other hand, liability is the potential outflow of
resources on account of past events (Leuz and Wysocki 2016).
Accounting standards had been introduced for providing the framework to generate the
accounts in fair manner. Standards of UK include IFRS (international financial reporting
standards). It is aimed for the consistency while producing reports for the entities. IASs and
IFRSs are produced for harmonizing reports of the bigger entities in European Union. True and
fair view is the legal requirements and the entities are obliged to follow procedures those are
outlined by the accounting standards for assuring that financial statements are of high quality and
are useful. Economic well-being of the entity depends on the sound infrastructure of financial
reporting. Single set of the standards enhances the comparability of financial information,
minimizes the compliance costs and enhances the audit consistency (Jessen et al. 2014).
Directors of the limited entities those are regulated by Companies Act are responsible for
using the accounting standards while preparing the accounts. Material departures shall be
explained in detail manner and reasons thereof shall be provided. Implementation of the
Companies Act 2006 has been completed in 2009 and it addressed the on-going issues those
were raised (Lueg, Punda and Burkert 2014).
Since the year 2005, listed entities in UK are required preparing the consolidated
financial statements in compliance with the IFRSs. However, all the other entities have the

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choice to choose among IFRSs and UK GAAP. In 2015, old financial standards as well as
guidance from financial reporting council have been replaced by the new UK GAAP. Accounts
for the period starting from 1st January 2015 shall be prepared applying the new standards and
existing FRSs, UITF abstracts, statements of principles for the financial reporting. Major
difference between GAAP and regulatory framework (RF) is that the RF is the principle of
standards based approach and is used on international basis while the GAAP is rule based
approach (Moscariello, Skerratt and Pizzo 2014). IASB is not responsible for setting up the
GAAP and it does not have legal authority over GAAP. It can be considered as an influential
group of various people those are involved in making up and debating the accounting rules.
While IASB sets the brand new accounting standards, various countries were tend to adopt the
same or at least interpret the same and fit the same into accounting standards of individual
country. The said standards are set by each of the accounting standard board of specific country
which in turn will influence to establish the GAAP of particular country. Although majority of
world are using IFRS standards, it is not the part of financial world. Some of the major
differences those are in existence among 2 sets of the accounting standards (Brown et al. 2017).
These are – (i) inventories – as per RF, LIFO method of inventory accounting is allowed whereas
as per GAAP, LIFO approach is allowed which is prohibited under RF (ii) development costs –
as per GAAP, development costs are accounted for as expenses whereas under IFRS these costs
are capitalized and in turn amortised over the multiple periods (iii) write-downs – under GAAP it
is specified that the amount of write-downs for inventories or for fixed assets cannot be reversed
if market value of the assets increases subsequently. On the contrary, RF allows reversal of
write-downs (Albu, Albu and Alexander 2014).