Please enable JavaScript.

Coggle requires JavaScript to display documents.

Ch 02 The financial reporting enviroment (Intro (concepts (financial…

- - - - process involving the collection and processing of financial information to assist decision-making of both internal and external stakeholders
      - focused on stakholders not in day-to-day contact with the organization
      - features
        
        heavily regulated
      - development and regulation
        
        double-entry accounting
        
        professional accounting bodies
        
        codification of accounting rules
      - regulation
        
        regulate or not to regulate
        
        rational against
        
        free market is more efficient in allocating reasorces
        
        capital markets demands information, failing to provide it will be punished by the market
        
        since users do not bear the cost of production, regulation leads to overproduction of information not reflecting the true need of consumers, if they had to pay for it.
        
        limit the freedom of selecting accounting method that best suits the specific conditions
        
        rational for
        
        Its to high of a gamble to relie on the it works on avrage
        
        creates inequality, where powerful agents can get better info than less powerful agents
        
        protects against fraudulent behaviors, keeps companies honest
        
        creates standards which makes comparisons easier
        
        markets for information are not efficient and without regulation a sub-optimal amount of info will be produced (market failure)
        
        who benefits from regulation?
        
        theories
        
        public interest theory
        
        regulation protects the public
        
        capture theory
        
        particular self-interest groups hijacks the regulatory mechanism after a while protecting themselves and not serving society at large
        
        private intrest theory
        
        governments are made up by individuals serving their own best interests, (getting reelection etc) regulations are primary for protecting those interests
        
        who should be in charge?
        
        private sector
        
        for
        
        the profession has superior knowledge, and its regulations has greater probability to be well adapted and accepted by and for the organizational enviroment
        
        public sector
        
        for
        
        greater enforcement powers
        
        more likely to act in the interests of society
        
        less subject to pressures
      - role of professional judgement
    - - focused on internal stakeholders
      - features
        
        largely unregulated