Global Regulation: Viability and Risks of International Standards

This paper discusses the role of international regulation in the creation of Global Accounting Standards Board (GASB) and the viability and risks of international standards. It covers integrated reporting, arguments for and against international standards, viability of allowing foreigners to make regulation for locals, and various risks involved in each alternative. The paper recommends making regulations simple with an adequate number of regulations, mandating the implementation of IFRS, and providing an appropriate explanation for the adoption and compliance of these standards.

Assignment: Global Regulation
Course: Bachelor of Business (Accounting) Code: BAC304
Unit of Competency: Advanced Accounting Theory
Date due: 19 April 2018
Lecturer: Alex Martin

Table of Contents
Integrated reporting................................................................................................................3
Arguments for and against the original move to international standards in 2005.................3
Viability to allow foreigners to make regulation for locals...................................................4
Viability of regulation............................................................................................................4
Various risks involved in each alternative.............................................................................5
Recommendations..................................................................................................................6
Conclusion..............................................................................................................................7
References..............................................................................................................................8

To
Members of Board
Treasury and the Australian Government
Respective Members of Board
The provided paper is based on the role of international regulation by considering case
scenario of 2020 which is focused on the merger of the US FASB and the London based
IASB for the creation of Global Accounting Standards Board (GASB).
Integrated reporting
Integrating reporting is a broadly based framework refers to the concept wherein companies
are required to have long-term approach for disclosure of value creation of business impact.
Further, integrating reporting in the company is a communication procedure that takes place
in providing concise communication regarding the creation of value over time through
strategy, governance and performance. An integrated report means clear communication
regarding the strategy of the organization, its governance, scenarios and performance
resulting in value creation for short, mid and long period of time. It is a broad structure for
organizations and decisions on investment based on long-term including its purpose (de
Villiers, Rinaldi and Unerman, 2014). Integrated reporting is a representation of corporate
performance on the basis of financial or any other valuable information. This reporting
structure offers wide context meant for performance data and states the effectiveness of
reliable value information into business operation which might assist in making better
business decisions for long–term.
Arguments for and against the original move to international standards in 2005
The potential advantages of international accounting standards are considered as compelling.
The implementation of one set of quality standards by corporate across the world will assist
in improving the transparency and contrast of financial information while reducing the costs
of preparing financial statements. While the standards are applied consistently and severely,
participants of the capital market can have high-quality information which helps in making
better decisions for long-term (Ball, 2006). Further, these arguments have been employed to
promote the implementation of IFRS meant for financial reporting to consolidate the listed
enterprises in EU. Other jurisdictions have placed same reasons for IFRS implementation,

stating the requirement for high-quality standards thereby improving the comparability and
value of financial reporting while promoting the national capital market development and the
market integration on a global basis.
Industry professionals against IFRS have made an argument that the benefits of a mere set of
global standards will not balance implementation costs and evolution of the standards. It has
been realized that those arguments in against of the evolution or implementation of IFRS
determined a higher degree of drawbacks (Damant, 2006). These are inclusive of losing
control of a nation over the set of standards and high transition costs to adopt IFRS. It is
because; inclusive of training and development of the employee, internet technologies,
particularly at the time of strict budgets loss an economic crises.
Viability to allow foreigners to make regulation for locals
The decision of allowing foreigners to make regulations for locals can be said viable to the
far extent as increasing of the globalization of capital market needs a unified global
accounting, reporting and disclosure of a set of standards. The qualification of personal
matters rather than the country to which professionals belongs as the same plays more
significant role in same. As foreigners can understand the rules and provision which have
been applied by them in more appropriate manner, thus they will be able to take decision in
more appropriate manner that in case one provision is applied to the whole word globally
than whether provisions which were previously applied as a country should be continued or
not (Nurunnabi, 2015). As the main objective of International Federation for an accountant is
to serve the public interest through strengthen the profession and contributing to efficient
international economies.
Viability of regulation
Every business has to face complexities regarding the issues related to accounting regulation
as the same has been based on wider business and scientific community. Li, (2015) asserted
that the more the no. of regulation the increased level of complexities of financial reporting
regulation and excessive administrative burden exist in accordance with the size of the
company regarding the issues which are being discussed between a representative of business
relating to useful information required for business. Reporting regulations assist in meeting
the demand relating to amendments in accounting standard. It leads to provide the
transparency which is required by the users at most priority in order to assess the manner in
which business operate and perform (Nurunnabi, 2015). Even the financial and accounting

executives do face the pressure relating to adopting and managing the cost relating to change
in reporting; thus in the case, detail regulations are available than same can be easily adopted.
As presently some form of sustainability reporting is being mandated in many EU countries.
The same assist the company in influencing their investors as well as a bank while
sustainability of commercial loan assessment and other investment decision.
But the fact cannot be denied that increased regulation usually leads to sound complexities
and inconsistencies. The reason behind same that it is not easy to understand and implement
detail procedures relating to accounting and reporting of financial statements (Hale and Held,
2018). Thus, one does not seem able to take a decision that whether they should be concerned
with the business operation or deal with issues relating to reporting of business activities.
Every business organization does not have appropriate resources to hire professional in order
to understand and apply these regulations and due to some reason it is possible that they do
not implement the same in an appropriate manner which will eventually lead the company to
penalties or other losses.
Various risks involved in each alternative
Each alternative has its own risk and benefit. The extent of risk depends on benefits which
have been attained through a specified alternative. In the present case as the increase
regulatory compliance, global accounting standard and detail disclosures along with
streamlined communication of financial results can be assessed in financial reporting. The
same leads to transparency, compliance with corporate governance in more appropriate
manner. But along with same the fact cannot be denied that a more-stringent regulatory
requirement leads to enhance the cost of being a public company. In this situation, more
preference would be provided to government companies with a higher degree of transparency
in books of accounts can be assessed with the same. Grabinskia, Kedziora and
Krasodomska( 2014), assessed that in these situations private companies would have to
provide additional disclosures so that public and investors are able to compare in an
appropriate manner and take a decision in the same accordance. It has also been assessed that
increased regulations lead to improving transparency but on the other hand, it increases the
complexity to the same extent. As a significant no. of challenges are faced by financial
executives in order to make the transition in accordance with IFRS. The fact cannot be denied
that requirement of global accounting standard is not only for a giant company but has been
needing of most of the companies and countries of the world; thus they required to be applied

in order to simplify financial communication. Even though the application of same would
lead to complexities as an even small organization will have to follow high detailed
regulations, but eventually, the financial statements will be more effective and cost-efficient
in accordance with same. But managing productivity in business operations along with new
emerging standards is not going to an easy task (Giner and et al.,2016 ). As it is not
appropriate to expect healthy and strong seedlings from unwell managed seedbeds, i.e.
absence of appropriate expertise. The implication of IFRS would lead to achieving an
enhanced level of consistency between internal and external reporting as through application
of same better access to international market would be possible, and the same will eventually
lead to increase in international competitors.
In case reduced stringent and less no. of laws and regulations are applicable; in that case, ease
will be available to the companies in order to accept the same. They will not have to indulge
additional resources as well as time to understand as well as implement detail regulation.
However, the specified ease might enhance the level of risk as in case regulations are not
available relating to a specified matter or only to a limited extent that the appropriate manner
of accounting the same cannot be judged. Frias‐Aceituno, Rodríguez and Garcia‐Sánchez,
( 2014) asserted that in this case investor would have to bear an enhanced level of risk as they
will not able to compare thing in the manner in which it would have been possible in case
when the regulation which is being applied were in detail form. In case the regulations are not
stringent than the same would not be applied by all the companies and the objective behind
same of making a financial statement of all the companies comparable would not be attained.
The reason behind same would be that companies will have to suffer wider financial issues as
well as other issues relating to the structuring of ESPOS schemes, modification of IT system
etc.
Recommendations
It can be recommended that rather than making detailed and complex regulations, an attempt
should be made to make it simple with adequate no. of regulations so that every business can
apply the same with ease. Moreover, if similar standards will be applied in each part of the
world that same would lead to greater communication with international regulators, the
investment community and other stakeholders. The objectives comprising high quality,
transparent and comparable financial statements can be attained with the adaption of common
standards at the global level. Further, an appropriate explanation should also be provided

regarding the manner in which these standards should be adopted and complied so that it
could be implemented in an appropriate manner. The application of same would provide
more relevant, reliable and timely information across all the jurisdiction, implementation of
IFRS should be mandated so that financial statements could be assessed in detail and
appropriate manner. As convergence with IFRS would provide strength in commercial
relationship between the companies as well as international financial societies as the
operations would be measured by same standards.
Conclusion
The above study depicts that adoption of international financial reporting standards would
lead to the attainment of benefits which comprises benefits of raising capital from abroad,
assistance to investors in making a more appropriate decision relating to investment. Further,
the study reveals the fact that with the change in accounting and reporting standards, the
requirements and need of financial executives have also been changed on financial as well as
non-financial metrics. Presently more no. of companies are providing result relating to
metrics on the basis of which longer-term sustainability of their business can be assessed. The
change in standards or adoption of IFRS has influenced the companies to provide additional
disclosure on a mandatory basis on the basis of which investors are able to make a more
appropriate investment decision.

References
Ball, R., 2006. International Financial Reporting Standards (IFRS): pros and cons for
investors. Accounting and business research, 36(sup1), pp.5-27.
Damant, D., 2006. Discussion of ‘International Financial Reporting Standards (IFRS): pros
and cons for investors’. Accounting and Business Research, 36(sup1), pp.29-30.
De Villiers, C., Rinaldi, L. and Unerman, J., 2014. Integrated Reporting: Insights, gaps and
an agenda for future research. Accounting, Auditing & Accountability Journal, 27(7),
pp.1042-1067.
Frias‐Aceituno, J.V., Rodríguez‐Ariza, L. and Garcia‐Sánchez, I.M., 2014. Explanatory
factors of integrated sustainability and financial reporting. Business strategy and the
environment, 23(1), pp.56-72.
Giner, B., Hellman, N., Jorissen, A., Quagli, A. and Taleb, A., 2016. On the ‘Review of
Structure and Effectiveness of the IFRS Foundation’: the EAA’s Financial Reporting
Standards Committee’s View. Accounting in Europe, 13(2), pp.285-294.
Grabinskia, K., Kedziora, M. and Krasodomska, J., 2014. The Polish accounting system and
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Hale, T. and Held, D. eds., 2018. The handbook of transnational governance: Institutions and
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Li, X., 2015. Accounting conservatism and the cost of capital: An international
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Nurunnabi, M., 2015. The impact of cultural factors on the implementation of global
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