ACCT19082 Financial Accounting Theory.docx

ACCT19082 Financial Accounting Theory.docx - Running Head...

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Running Head: ACCT19082 Financial Accounting Theory Financial Accounting Theory Part A i. Regulatory capture occurs when industries that have high stakes in the industries attempt to channel their energies and resources towards the regulatory decisions and policies outcomes to gain their preferred policy outcomes (Baker & Andrew, 650). As this happens, other players in the industries who have relatively smaller stakes in the outcomes are ignored. Therefore, regulatory capture actions reference the actions of the main interest groups in a given industry while there is an imbalance due to focused resources that are channeled towards a particular policy outcome succeeds in securing the attention commission members that run a given regulatory agency such as IASB. Thus, the preferred policy outcomes of major players in the given industry are implemented. Not long ago, there was a significant turn in Australia’s approach to the global accounting standards. This change emerged from the Australia changing from ensuring consistency of its accounting standards with the IFRS by the year 2005 developed by the IASB to outright adoption of the IFRS for the same year. At the time of the change Australia had one of the most established global harmonization programs than any other country with a well-developed financial reporting system. The events that surrounded the change are an indicator of how the political landscape influences the accounting standards setting processes. This may be due to the processes receiving media attention since it offers a platform for the parliamentary and electoral discussions.
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Running Head: ACCT19082 Financial Accounting Theory Similarly, the US in its global accounting standards setting process has undergone various phases of indifference to potential active dominance, as the European influences continue to diminish. Therefore, drawing from the experiences of Australia and the US, it is clear that there have been political forces on the initiatives that have led to the reforms of setting the accounting standards, policies as well as processes. Although there have been many supporters of switching to global accounting standards, there are those who are more concerned with the implementation process. Hence, there are no assumptions that the accounting standards or the international standards are the models. Actually, the politics that surround the setting of accounting standards imply that the standards inevitably reflect the conflicts that exist between theoretical ideals and the acceptable regulations. It may be an error, therefore, to assume that Australia’s and the US accounting standards are esteemed over several years. However, there has been fundamental philosophical differences between the regulatory approaches of AASB and the US FASB. This is because the AASB uses a principle approach while the FASB uses a perspective method, which has thorough rules that are perhaps less theoretically based. Traditionally the setting of accounting standards was inspired by the public interest. This is to say that there is some public interest in the efficient operation of both debt and
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  • Fall '15
  • TomNamwamba
  • International Financial Reporting Standards

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