BAC304: Advanced Accounting Theory - Global Regulation Report

This report analyzes the proposed merger of the US FASB and the London-based IASB, creating the Global Accounting Standards Board (GASB). It explores the implications of this merger, including the rewriting of accounting standards and the adoption of GAAP interpretations. The report discusses integrated reporting, its benefits, and its origins in corporate social responsibility. It examines the pros and cons of moving to international standards, specifically the IFRS, and the development of financial regulations and accounting standards both locally and internationally. The report also compares GASB with Australian accounting standards and provides recommendations for the members of AASB, concluding with the importance of the IFRS and its impact on the financial market.

Running Head: Advance Accounting Theory
Global-Regulation
Name of the University
Name of the Student
Author Note

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Advance Accounting Theory
Executive Summary
The purpose of the report is to inform about the GASB merger with the US FASB with the IASB
standard to present and prepare to be accepted globally. Information about the GASB and
Australian Standard. Discussion on the integrated Reporting which affect the country and the
company. Incorporating the IR help business financially and non-financially in the market.
Discuss the International accounting standard and the development of the Financial Regulation
locally and internationally.

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Table of Contents
Introduction......................................................................................................................................3
Discussion........................................................................................................................................3
Integrated Reporting....................................................................................................................3
Move to international standards in 2005- Pros and Cons............................................................4
Development of financial regulation and accounting standards, both locally and internationally
.....................................................................................................................................................7
Regulations Inherently Good or Bad...........................................................................................9
GASB versus Australia’s Regulation..........................................................................................9
Recommendation to the member of AASB...................................................................................10
Conclusion.....................................................................................................................................11
Reference and Bibliography..........................................................................................................12

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Advance Accounting Theory
Introduction
The report discusses the GASB in the accounting standard and US and London member
wanted to merge with the US FASB with the IASB standard to present and prepare to be
accepted globally. It distinguishes between the creation of the GASB and the development of the
Australian financial regulatory standards about their use in the global context and Australia
standard is helpful for the Australian public and government use however GASB is for the use of
global context. Still, a few countries have separated the idea of adopting GASB rather; those
countries would amend a new version of IFRS. In this report, Integrated reporting is explained in
brief, which is based on a single reporting system, both financial and a non-financial
presentation. It creates value over time, along with the business model. Integrated reporting
origin is corporate social responsibility. The participants included the UNDP, the Wales Audit
Office, the World Bank Group, the City of the London Corporation and the UK government
departments. Both locally and internationally development of financial regulation and accounting
standards is mentioned related to the IFRS and Australian accounting. Financial Regulation is
helpful for the country financial and economic growth and hence maintain the financial strength
in the country.
Discussion
Integrated Reporting
Integrated Reporting is an interpretation of a financial and a non-financial presentation of
a company based in a single report. This reporting helps to give a huge context to the non-
financial data like the company’s performance based on the social, environmental and
governance parameter and the sustainability surrounded with the core business strategy. It

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creates value over time, along with the business model. Integrated reporting origin is corporate
social responsibility. It has the idea that a company is accountable to assist its shareholders and
other stakeholders and aimed at long term at long-termed investors. It identifies the tangible and
intangible resources (capital) represent the “value-creation process like financial capital,
intellectual capital, manufactured capital, human capital, social and relationship capital and
natural capital”. It manages to sustainability strategy in terms of performance and the market
value will be affected with this performance (Tol, Atabey, & Antonsson, 2019). Integrated
reporting finds the interdependency between the internal and the external elements. It works as a
leader in the private sector and spread among different countries rapidly as well as to the public
sector. In the year 2014 November, public sector pioneer network, formed by the International
Integrated Reporting council goes with the Chartered Institute of the Public Finance and
Accountancy partnership to look for the acceptance by the Public sector Organisation (De
Villiers, Venter, & Hsiao, 2017). The participants included the UNDP, the Wales Audit Office,
the World Bank Group, the City of the London Corporation and the UK government
departments. In the year 2016, September, a connective group was formed to help the public
sector leaders and their staffs to apply Integrated Reporting to enhance the accountability,
transparency, governance and trust for the stakeholders to use the resources and the value
creation process. As the implementation and creation were new, there was a certain lag in
maintaining the data however the use was raised in the public sector and gained widely.
Move to International standards in 2005- Pros and Cons
The “International Accounting Standards (IAS)” are the older standards of accounting
issued by the “International Accounting Standard Board (IASB)” based in London, restructured
by the “International Accounting Standard Committee (IASC)” end of the twentieth century. IAS

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is the sole independent body of International Standards. However, it replaced in the year 2001 to
the IFRS “International Financial Accounting Standard” by the IASB. IFRS is a set of common
rules used by the business reporting and checking the financial result from anywhere in the world
except the US. The primary purpose of the IFRS is to provide a global framework for the public
companies to prepare and disclose the financial statement. The financial statement must be
transparent, comparable and consistent with the world. It has the general guidance to prepare the
financial statement rather than setting rules for the specific industry reporting (Al-Shattarat,
2016). For any business, it easy to accept because most business prepares its financial statement
based on the same standards and guidelines. It can be compared with other companies more
clearly and accurately. It is important because it involved in international trade, which is
transparent and easy to compare which has a huge impact on the economy and give opportunities
for the new business and investors to commence. However, it is not mandatory for all, it can be
accepted by domestic entities, including financial and non-financial institution, but it is mostly
used by the small and medium enterprises (Chen et al., 2016). International accounting standard
2005 is explained along with its pros and cons of the accounting standards.
Pros and Cons of the IFRS
IFRS used by all the listed companies in the European Union Countries with effect from
2005. The IFRS has first issues in 2003 and 19countries required the compliance with this
International Standard and since then 70 more companies used the IFRS as a mandate. IFRS help
to develop the economic theory of the country by productive network effect and most countries
do not adopt the IFRS because of it increased in the inter-temporary use all over the world and
hence the value increases due to IFRS networking. It helps in the trading level with increase
trade partner across countries. It directly impacted on the net economic and the net political value

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over the local standards. It reduces the cost to information from the economy, mainly in cash
flow and trade which are globally known. It is affordable for the capital market participants and
is known as one set of global standards along with several local standards. It increases foreign
investment and trade. The adoption of the IFRS has changed the market scenario, market
liquidity and cost to the company’s capital. Market liquidity has increased after the adoption of
the IFRS guidelines or rules into the business. Decrease of the firm’s cost of capital and increase
in the equity value occurrence before the adoption officially. Improved liquidity and low cost of
capital benefited the company and increased the disclosure of information and enhancement to
all over the countries (Pawsey, 2017). It became helpful for the European Union countries along
with their national standards. IFRS reveals information on the new specific firm, and this
enhances the investor to trade as per the share price by checking the volatility and trading
volume. This increases foreign investment, reduce reported lagging and increase analyst
following. Investors get benefits from the company which uses high-quality, comparable
standards. Investment in the foreign firm made by the individual investors on the open market at
the “Frankfurt stock exchange”. IFRS has the efficiency to promote more for the foreign equity
investment by the individual investor.
The benefits of IFRS is reducing due to the quality of the local government institutions,
which include the quality of the local GAAP. The disadvantages for the IFRS are for the small
business to implement the IFRS rule will be costly for them, as for them the cost to bare for such
methods would be expensive and they cannot afford the time or cannot train their staff for this
method. For them, it would be time-consuming and fewer resources available for the small and
medium enterprises. US will not adopt the IFRS; instead, GAAP will be favourable for them to
understand and adopt. As this standard discloses financial statement to all the traders and the

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investor it may lead to fraudulent in a financial statement with the revenue, profit, change in the
inventory valuation methods to show more income in the profit and loss statement. The US has
its own accounting rules to enforce the Policy. However, IFRS will be challenging for most of
the countries who do not adopt the method of accounting. IFRS need enforcement and auditing
globally. IFRS can be implemented with other national accounting methods and strategy based
on the company’s rules and Regulation which may cause a problem when it compared with
another accounting system. Effective knowledge is not given to most entrepreneur and hence
they adopt the IFRS without knowing about its investment structure and rules. Mostly in the US,
are not given proper education regarding IFRS use and hence business uses their primary
standards. Still, most businesses make cross border investment and for that knowledge related to
the IFRS is needed so that investment would be easily accessible (Chief, 2019).
Development of financial regulation and accounting standards, both locally and
internationally
Financial Regulation is that Regulation form which maintained by the Financial
institution with certain restriction, requirement and guidelines to control and maintain the
stability and integrity of the financial system. This Regulation is maintained and controlled by
the government and non-government organisation. “Financial regulatory bodies like Financial
Industry regulatory authority, national credit union administration, office of the comptroller of
the currency and consumer financial protection bureau”. The purpose of the financial Regulation
is to guide the financial market and the financial institution. It maintains stability and integrity
and protect the investors in an organised market and promote financial stability.
The development of the financial Regulation is based on the stability, sustainability,
growth and efficiency structure. Stability is important because an unstable financial stage will

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negatively impact on the economic structure. Financial stability will enhance the requirement of
capital and strengthen financial stability. However, the stability in the financial system will also
affect the economic structure. Like system with a narrow bank or non-par bank be exposed to the
lower systematic risk. In the developed countries, the economic structure is in growing nature
and have both scopes and spread of universal banking. In a concentrated banking system, lower
margins, operating cost and high profit (Vittas, 2020). On the other side in the developing
countries, the large bank becomes inefficient due to the size, control and restriction on
competition. Hence allowing the universal banking system will ruin the dominant position of the
large banks and give adverse effect on the efficiency and competition. Financial development
will reduce poverty and development in the investment nature in the respective country.
Financial regulatory carries bank operation through profit and loans. Increase deposit will
increase the financial system and increase the profit margin structure of the bank. Hence
financial regulatory will be stable if the investment is increase and safe asset purchase but the
banking institution (Limodio, & Strobbe, 2016).
The development of the Accounting Standard, IFRS is developed by the IASB and used
to establish the use globally to maintain as a common language worldwide so that the financial
statement can easily be understood and interpreted by countries and by companies. Its adoption
in any business gives a clear and transparent financial statement to the financial market to
understand by investor easily. The Use of IFRS is globally popular due to its effective cost and
easily understood by every company and are common for most companies due to the accounting
standard application by all the companies except the US.
Australia has its national accounting standard, which is linked with the International
Financial standard board. Australia adopted the guidelines of the Australia accounting Standard

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board, which is a government agency to develop and maintain the financial reporting standard
applicable to the private and public sector companies. The AASB rules are adopted by only the
Australian agencies with the profit and not for profit organisation and along with implementing
the Australian International Financial Reporting Standards. Use of IFRS is supported mostly
globally as it is easy to understand and chosen by many countries and companies so that the
investors can easily understand the financial reporting and statement of the company for the
investment purpose. Banking institution helps those companies which have a good return on
investment and have a huge revenue generation capacity with the help of the financial statement
such companies can get easy access to loans and thus help in investment and earn profit from it
along with the help of the foreign investor (Huang & Yan, 2019).
Regulations Inherently Good or Bad
Inherent Financial Regulation protects the security of the public and government are
related in the adoption of the financial Regulation which helps to reduce the risk of future which
would help the country’s economic structure for development purpose and growth in industrial
trade and business. The Financial Regulation includes balance sheet standards, consumer
protections, broader conflict of interest laws and insider trading rules. Inherent Regulation
maintains and controls the financial requirement, guidelines, financial stability, sustainability in
the present and the long-run economic objective to integrate the financial system to its country
and across the world. It helps government and non-government organisation related to the
investment and growth and development purpose of the business and country. It strengthens the
economy to compete with other countries in term of financial stability and build a strong position
to sustain in the financial market globally (Forcadell, Aracil & Úbeda, 2020). Hence Financial
Regulation is good for any country and business or trading aspect.

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GASB versus Australia’s Regulation
GASB is “Global Accounting Standard Board” is a merger of the “FASB” and “IASB” to
set a globally compatible standard which is accepted by all countries. It set rules of state and
local government to work collaboratively. The risk related to the GASB is related to the bank
loan structure. The important thing in the adoption of GASB is that it supports both the FASB
and IASB, and there will no use of IFRS in the US standards. FASB will accept the rules of the
GAAP rather than accepting the IFRS which was criticised by its use globally as it is mostly
made for the larger entities ignoring the Small and Medium enterprises. However, the US agreed
with the proposal of uniting the IASB with the FASB and with include the environmental
performance measurement as an integrated reporting system (Huang & Yan, 2019). However,
this change will increase the cost of compliance on the current system which will take time to
adapt. Australian financial Regulation is spilt between the “Australian securities and investment
commission and Australian Prudential Regulatory Authority”. Australian Securities and
investment commission has the responsibility to protect the customer and market integrity and
investment regulation to a bank and financial companies. Australian accounting standard board is
both for the public and for the government organisation. It includes the profit-making
organisation and not for profit organisation with the help of the organisation as a whole.
Recommendation to the member of AASB
The Australian accounting standard Board has to check with the requirement of the
government and private companies whether the GASB introduction will be helpful for both the
sectors in terms of politically, environmentally, socially and financially. Support environmental
changes to increase global integration. Incorporating the integration reporting to every company
which will maintain the performance of environment, social and economic context. Financial

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Regulation has to be maintained especially for the financial institution and increase the trade of
foreign investors and make easy understanding the financial reporting for them.
Conclusion
It can be concluded that the Integrated Reporting is an interpretation of a financial and a
non-financial presentation of a company based in a single report. Applying Integrated Reporting
to enhance the accountability, transparency, governance and trust for the stakeholders to use the
resources and the value creation process. IFRS has the potential to promote more for the foreign
equity investment by the individual investor. The benefits of IFRS is reducing due to the quality
of the local government institutions, which include the quality of the local GAAP. Financial
Regulation strengthens the economy to compete with other countries in term of financial stability
and build a strong position to sustain in the financial market globally The important thing in the
adoption of GASB is that it support both the FASB and IASB and there will no use of IFRS in
the US standards and Financial Regulation is good for any country and business or trading
aspect.