Regulatory Financial Reporting: Contemporary Accounting Theory Study

This report provides a comprehensive literature review of the financial reporting regulatory requirements in Australia and Singapore. It discusses perceived problems within each system, including challenges in IFRS adoption, such as a lack of training and technical knowledge, as well as issues related to legal and political environments. In Singapore, challenges pertain to initiating new revenue standards (FRS 115). The report examines the regulatory environment's workings, major decision-makers, and legislative requirements, also assessing each country's progress towards IFRS adoption. The findings suggest that Australia is better positioned for regulatory compliance compared to Singapore. Furthermore, the report analyzes the financial regulatory environment through the lens of Regulatory Capture Theory, explaining its usefulness and identifying characteristics indicating potential capture.

Running head: CONTEMPORARY ACCOUNTING THEORY
Contemporary Accounting Theory
Name of Student:
Name of University:
Author’s Note:

1CONTEMPORARY ACCOUNTING THEORY
Executive Summary
The discourse of the study aims to review the literature of Australia and Singapore’s regulatory
requirement for the financial reporting. The discussions on the individual regulatory environment
has commented on the various types of the perceived problems of the regulatory environment of
the individual countries. It has also stated about the different aspects of the how the environment
works and who are the major decision makers. Some of the other discussions have been related
to the discussion associated to the what legislation is required. The report has also discussed
about the country’s progress towards the adoption of IFRS. The findings of the study have found
that IFRS compliance to the legal and political environment and this has been a major challenge.
In various cases the presentation of information and understanding of the technical knowledge
has been a major challenge to the adoption of the regulatory framework. In addition to this, the
challenges in the Singapore has been discerned with the challenges pertaining to the initiating
new revenue standard. This is considered with in accordance to the EY “poll of 53 finance
executives in Singapore, conducted in late November 2016”. More than 62% of the respondents
of the poll have indicated that they have not started identifying and evaluating the key impact of
FRS 115. The comparison of the regulatory framework has stated that Australia in in a better
position for complying with the regulatory framework in compare to Singapore.

2CONTEMPORARY ACCOUNTING THEORY
Table of Contents
Introduction......................................................................................................................................2
Part A...............................................................................................................................................2
The perceived problems of each system..........................................................................................2
Working of Regulatory Environment..............................................................................................3
Country’s progress towards the adoption of IFRS..........................................................................4
Part B...............................................................................................................................................5
Regulatory Capture Theory and its usefulness................................................................................5
Characteristics indicating regulatory environment might be “captured”........................................6
Conclusion.......................................................................................................................................6
References........................................................................................................................................8

3CONTEMPORARY ACCOUNTING THEORY
Introduction
As discussed by Bryce, Ali, & Mather, (2015), “Financial regulation” is identified as that
form of rule which subjects financial organizations to consider “certain requirements”, guideline
and restrictions aiming to maintain the integrity within the financial system. These regulations
may be both “government or non-government organization”. In addition to this, financial
regulation has influenced the structure of banking sectors by increasing the variety in the
availability of the financial products. The report has undertaken the literature review of Australia
and Singapore’s regulatory requirement for the financial reporting. The discussions on the
individual regulatory environment has commented on the various types of the perceived
problems of the regulatory environment of the individual countries. It has also stated about the
different aspects of the how the environment works and who are the major decision makers.
Some of the other discussions have been related to the discussion associated to the what
legislation is required. The report has also discussed about the country’s progress towards the
adoption of IFRS. The second part of the report has analysed each of the selected environment
and assessed the financial regulatory environment through the lens of Regulatory Capture
Theory. To explain these topics, the report has highlighted on the “what regulatory capture
theory is and why is might be useful”. It has also discussed about the characteristics which may
indicate the that a regulatory environment might be “captured” (Chen, Ng, & Tsang, 2015).
Part A
The perceived problems of each system
The implementation of IFRS in Australia was depicted with the motive to improve the
“standards, comparability, accuracy and transparency of financial statements for a company
within a particular period”. However, the adoption of IFRS in Australia is depicted with the
issues such as lack of training, “problem for the entities, auditors, regulators as well as the
interesting parties who are familiar with previous accounting standards”. This is also considered
as a major challenge for adhering to the necessities of gaining addition skills for application and
evaluation of “IFRS”. Some of the significant issues has been also seen with the IFRS
compliance to the legal and political environment and this has been a major challenge. In various

4CONTEMPORARY ACCOUNTING THEORY
cases the presentation of information and understanding of the technical knowledge has been a
major challenge to the adoption (Hla & Md Isa, 2015).
The “Singapore Financial Reporting Standards” is seen with challenges in implementing
“FRS 115”. Many companies are yet to adopt the new revenue structure and facing the
challenges pertaining to the initiating new revenue standard. This is considered with in
accordance to the EY “poll of 53 finance executives in Singapore, conducted in late November
2016”. More than 62% of the respondents of the poll have designated that they have not started
identifying and assessing the key impact of FRS 115. Moreover, some of the new emerging
companies are seen to be facing issues in adopting the other regulations prescribed by other
SFRS standards. In some of the other cases the lack of finance experts is seen to be posing major
challenge to the companies (Sugiyama & Islam, 2016).
Working of Regulatory Environment
AASB is recognised as an agency of the “Australian Government”. The “AASB
standards are known as Australian Accounting Standards and include Australian equivalents to
International Financial Reporting Standards (IFRSs)”. The first adoption of the IFRS as
“Australian Accounting Standards, the AASB made some modifications to IFRSs, including
removing some options and adding some disclosures” (Cascino & Gassen, 2015). It has been
observed that in 2007, AASB made some modifications in the “Australian Accounting
Standards” so that the various types of the requirements were identical to the “IFRSs as issued by
the IASB for for-profit entities” (Meier & Mitscherlich, 2015). Some of the other disclosures is
compliant to the extra exposures which were retained and “non-IFRS compliant requirements”
were seen to be applied for the “not-for-profit and public-sector entities”. The new differential
reporting regime published by “Australian Accounting Standards Board (AASB) in July 2010”
were elected to adopt the “Reduced Disclosure Requirements' (RDR)”. The requirements as per
the RDR entitles to follow the acknowledgement and measurement requirements for all
“Australian Accounting Standards (which are equivalent to IFRSs), but with reduced disclosure
requirements” (Joshi, Yapa, & Kraal, 2016).
In Singapore the Accounting Standards council (ASC) has the statutory authority for
issuing SFRS adoption. The group of entities for reporting the entity under the common control

5CONTEMPORARY ACCOUNTING THEORY
is considered under common control which is based under a single customer. The main
assessment of the financial regulatory decisions is seen with the government agencies which are
included under similar bodies of single customer. Some of the important legislations for the
SFRS implementation has been recognised with the “International Financial Reporting Standards
(IFRS) that are issued by the International Accounting Standards Board (IASB)”. It has been
depicted that the financial statements of the following entities are able to provide the adequate
information about the performance and the cash flows along with a variety of users in making the
important economic decisions. The various type of the users of the financial statement ranges
from the “shareholders, creditors, employees and the public” (Christensen et al., 2015).
Country’s progress towards the adoption of IFRS
“Australia adopted IFRSs effective from 1 January 2005”, in “2015 the AASB”
commenced the examination for the implementation to assess the ongoing relevance of IFRS to
the “Australian for-profit and not-for-profit (NFP)” reporting entities. In most of the sectors the
transition process is seen to be smooth, the IFRS is considered as an appropriate basis for the
NFP standards which is developed by the AASB (Ji & Lu, 2014). However, there has been
several scopes for the modifications which are needed for the quality and cost-efficiency of
reporting. The adoption of IFRS in all the sectors has allowed the users and preparers to move
between the sectors and countries with transferable skills and knowledge. The universally active
entities are seen to be based on the adopting the IFRSs across all the sectors which has enabled
the users and preparers to fully comply with the new standards especially with regards to the
“disclosure requirements” (Ramanna & Sletten, 2014).
The separate or the individual financial statements of the “Full Convergence with
International Financial Reporting Standards (IFRS)” in Singapore. On 29th December 2017,
ASC was seen with “Standards (International) (SFRS(I)s), Singapore's equivalent of the
International Financial Reporting Standards (IFRSs)”. “Singapore incorporated companies”
have issued the procedure of dispensing the equity or the debt instruments for trading the public
market in Singapore which are seen to be required to apply for the “SFRS(I)s for annual periods
beginning on or after 1 January 2018”. The recognition of the importance for the ASC has
affirmed that Singapore financial reporting standard registered BTs: IFRS. The authorised “CIS

6CONTEMPORARY ACCOUNTING THEORY
statement” of the suggested accounting practice 7 is consistent with the major funding
jurisdictions like USA and UK (Kabir & Rahman, 2016). The IFRS convergence, ISCA has
depicted audit partners from different public accounting firms. The converging exercise is
required to highlight the main considerations for the entities converging with the SG-IFRS.
“Singapore Financial Reporting Standards” (“SFRS”)”, is obligatory to “apply all the specific
transition requirements” in “IFRS 1 First-time Adoption of IFRS” (Morris, Gray, Pickering, &
Aisbitt, 2014).
Part B
Regulatory Capture Theory and its usefulness
The supervisory capture is a theory is related to the “George Stigler, a Nobel laureate
economist”. This process is regulated by the agencies which eventually come to be dominated
with the industries requiring regulation. The regulatory capture takes places when a controlling
agency is formed to act in the interest of the public (Tan, Chatterjee, & Bolt, 2014). This
eventually acts in the means of providing benefits to the interest of the public. This has been
further seen to be providing benefit to the industry it is supposed to be regulating, rather than the
public. The “regulatory capture theory has been identified as a government failure which occurs”
when the regulatory agency is created to act with the public interest instead of the advances from
the political or the commercial concerns of special interests (Cheung & Lau, 2016).
The public interest agencies are considered to be controlled by the industries which were
charged with the captured agencies. The regulatory capture has been further seen to be
considered with the various types of the agencies which are related to situations where the
gamekeeper turns poacher. In other word the interest agency sets out to protect the ignored in
favour of the regulatory interest. The “regulatory capture theory” is associated as the core focus
on the branch of public choice, which is often referred as the economics of regulation; and
economics in the speciality are critical for the conceptualization of the government “regulatory
intervention” (Chen et al., 2015). The theory of regulatory capture has been considered with very
nature of the risk to which the agency is exposed by the very nature. The various types of the
suggestions as per the regulatory environment has been further able to related the different type

7CONTEMPORARY ACCOUNTING THEORY
the theories and suggest that these theories are protected from the outside effect as much as
possible. The recent interpretations of the has been able to suggest on the mature democracies
considered with the high levels of the transparency and the media which is exposed to the
“higher levels” of corruptions (Cai, Rahman, & Courtenay, 2014).
Characteristics indicating regulatory environment might be “captured”
The analysis of the characteristics indicated that a regulatory environment might be
“captured” with the given literature which can be seen with identifying the various types of the
regulatory environment for the individual countries. It is also depicted that in several cases IFRS
in Australia is conducive with implementing the cost savings in preparing financial reports.
There have been several instances where the organizations have been able to benefit from the
implementation of the complying with the new standards and the exposure draft. These changes
have been tracked after the companies are seen to be controlled by the industries which were
charged with the captured agencies. In several occasions the difficulties in the implementation of
the NFP standards developed by the AASB has been conducive in the IFRS implementation.
The regulatory environment is identified to be also complying with the medium-sized
environment which is seen to be considered with the “new standards especially” as per the
expose requirement. The literature review of the Singapore has been further able to comment on
the means of providing benefits to the interest of the public. The Singapore government is
depicted to make several types of the changes in the government policy. The addressing of the
issues by the Singapore government in terms of the regulatory capture is considered with the
applications of the various types of the statutory changes made in the financial regulatory
environment (Cai, Rahman, & Courtenay, 2014).
Conclusion
The report has been able to state that perceived problems of each system has been
identified with the issues such as lack of training, “problem for the entities, auditors, regulators
as well as the interesting parties who are familiar with previous accounting standards”. This is
also considered as a major challenge for adhering to the “requirements of gaining addition skills
for application and evaluation of IFRS”. The problems of the SFRS is identified with challenges

8CONTEMPORARY ACCOUNTING THEORY
pertaining to the initiating new revenue standard. The significant findings on the working of
regulatory environment have shown the first adoption of the IFRS as “Australian Accounting
Standards, the AASB made some modifications to IFRSs, including removing some options and
adding some disclosures”. In addition to this, in Singapore the Accounting Standards council
(ASC) has the statutory authority for issuing SFRS adoption. The country’s advancement
towards the adoption of “IFRS” has been identified with Australia's adoption of IFRS being
effective from 1 January 2005. In most of the sectors the transition process has been seen to be
smooth, the IFRS is considered as suitable for the “NFP standards” which is developed by the
AASB. The Singapore's progress towards the adoption of IFRS is considered with the “Full
Convergence with International Financial Reporting Standards (IFRS)” in Singapore. On 29th
December 2017, ASC was seen with “Standards (International) (SFRS(I)s), Singapore's
equivalent of the International Financial Reporting Standards (IFRSs)”. It is also seen that both
the country has complied with regulatory capture theory.

9CONTEMPORARY ACCOUNTING THEORY
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