Current issues in accounting and finance

1. CURRENT ISSUES IN ACCOUNTING AND FINANCE Presented By: Abdul Ajay

2. Objective of financial statements • To provide information about the financial position, performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions • Financial statements do not provide all necessary information, rather: • Largely portray the financial effects of past events • Do not necessarily provide non-financial information

3. International Financial Reporting Standards • Principles-based” standards • Developed by International Accounting Standards Board (based in London, England) • Broad international representation • Independent • Extensive due process • A single set of globally converged, high quality accounting standards • Regulatory backing – IOSCO, EU, etc. • Globally accepted (100+ countries) • SEC – 2011 to decide if IFRS mandatory for 2014

4. IAS / IFRS - Recent progress in Europe • December 2001- EFRAG Reports on Consistency of modernized Directives and IAS • December 2001- ECOFIN, European Parliament discuss the proposed IAS regulation • March 2002- European Parliament overwhelmingly adopts IAS resolution • April 2002- Parliament and Council amend the accounting Directives • May 2002- The Council of the EU has adopted an “IAS Regulation” • May 2003- The Council of Ministers has adopted proposals to modernize the existing Accounting Directives • June 2000- EC Recommendations on IAS submitted to Council and Parliament • February 2001- Proposal to require IAS for listed companies • April 2001- EC Comparisons of IAS with Directives • July 2001- EU Economic and Social Committee indorsed the Proposal that would adopt IAS in Europe by 2005 • October 2001- Parliament and Council amend the accounting Directives

5. ACCOUNTING INFORMATION SYSTEM DESIGN • Descriptions of accounting information resources. • Collection and organization tool of accounting information. • Automatic monitoring on accounting information source and comprehensive data analysis. • Excavation and provision of enterprise accounting information. • Information feedback and interaction of enterprise accounting information users.

6. Types of ACCOUNTING INFORMATION SYSTEM DESIGN • Stand-alone structure design method • Multi-user structure design method • Network structure design method • Cloud computing structure design method

7. Issues in corporate failure • Bad investments in “new economy” ventures • Off-balance-sheet entities created to eliminate losses from the ventures • Rather than face the write-offs, they tried to hide them with accounting • Many off-balance-sheet loans collateralized by Enron stock • Opaque reporting encouraged short sellers • Form over substance in reporting

8. Issues in corporate failure (Enron Example) • Arrogant corporate culture • Finance and accounting staff largely recruited from Andersen – independence compromised • Opaque reporting posture with investors • Special investigation by main legal counsel – not independent counsel • Andersen apparently consciously decided not to resign last year. They should have. • Failure rests 75% with the mgt team, 15% with the Board and 10% with the auditor • These events happen on the financial management front line • Failed management teams that don’t have the backbone to do the right thing • Starts with small compromises and becomes a culture of aggressive accounting, then illegal coverup • The local audit partner doesn’t have the backbone to stand up to the client or walk away

9. International financial reporting • The series of accounting standards, known as the International Accounting Standards (IAS), were released by the IASC between 1973 and 2000, and were ordered numerically. The series started with IAS 1, and concluded with the IAS 41, in December 2000 • Since 2005 listed groups in the UK have been required to prepare their consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs). • The FRC collaborates with accounting standard-setters from other countries and the International Accounting Standards Board (IASB) in order to influence the development of international standards and to ensure that its standards are developed with due regard to international developments. • One role of the FRC is to issue accounting standards. It is recognised for that purpose under the Companies Act 1985. 

10. International financial reporting • FRS 100 sets out the financial reporting framework and outlines which standards to apply. It also outlines the application of Statements of Recommended Practice (SORPS) and transitional arrangements from the current standards. • FRS 101 is a proposed reduced disclosure framework for qualifying entities preparing their financial statements in accordance with IFRSs. • FRS 102 contains the text of a comprehensive proposed accounting standard based upon the International Financial Reporting Standard for Small and Medium-sized Entities, this would replace current UK GAAP. • The titles of some of the financial statements have been changed: • A Balance Sheet is now referred to as a ‘Statement of Financial Position’, • A Cash Flow Statement is referred to as a ‘Statement of Cash Flows’. • A Profit and Loss Account is referred to as a ‘Statement of Comprehensive Income’.

11. SECUIRTY IN FINANCE & ACCOUNT MANAGEMENT • Contemporary Security Issues: • Compliance • Protecting Privacy and Data Security • Managing Third-Party Risk • Rising Expectations • Emerging and Advanced Threats • To protect investors by improving the accuracy and reliability of corporate disclosures made pursuant to the securities law. • All of these systems employ relational databases, and these projects include database security and auditing implementations.

12. Principles of corporate governance • Rights and equitable treatment of shareholders • Interests of other stakeholders • Role and responsibilities of the board • Integrity and ethical behaviour • Disclosure and transparency

13. The UK corporate governance code Published by the Financial Reporting Council in June 2010 The main principles of the code A: Leadership B: Effectiveness C: Accountability D: Remuneration E: Relations with Shareholders

14. Accountability under corporate governance • The board should present a balanced and understandable assessment of the company’s position and prospects. • The board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives. The board should maintain sound risk management and internal control systems. • The board should establish formal and transparent arrangements for considering how they should apply the corporate reporting and risk management and internal control principles and for maintaining an appropriate relationship with the company’s auditor.

15. Key characteristics of optimum corporate governance • Positive relationships between governors and school leaders are based on trust, openness and transparency. Effective governing bodies systematically monitor their school’s progress towards meeting agreed development targets. Information about what is going well and why, and what is not going well and why, is shared. Governors consistently ask for more information, explanation or clarification. This makes a strong contribution to robust planning for improvement. • Governors are well informed and knowledgeable because they are given high- quality, accurate information that is concise and focused on pupil achievement. This information is made accessible by being presented in a wide variety of formats, including charts and graphs. • Outstanding governors are able to take and support hard decisions in the interests of pupils: to back the head teacher when they need to change staff, or to change the head teacher when absolutely necessary.

16. References • Ball, A., Grubnic, S. and Birchall, J., 2014. 11 Sustainability accounting and accountability in the public sector. Sustainability accounting and accountability, p.176. • Ball, R., 2001. Infrastructure requirements for an economically efficient system of public financial reporting and disclosure. Brookings-Wharton papers on financial services, 2001(1), pp.127-169. • Ball, R., 2006. International Financial Reporting Standards (IFRS): pros and cons for investors. Accounting and business research, 36(sup1), pp.5-27. • Barker, R., 2004. Reporting financial performance. Accounting horizons, 18(2), pp.157-172. • Blowfield, M. and Murray, A., 2014. Corporate responsibility. Oxford University Press. • Collier, P.M., 2015. Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons. • Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press. • Daske, H. and Gebhardt, G., 2006. International financial reporting standards and experts’ perceptions of disclosure quality. Abacus, 42(3‐4), pp.461-498. • Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia. • Dhaliwal, D., Li, O.Z., Tsang, A. and Yang, Y.G., 2014. Corporate social responsibility disclosure and the cost of equity capital: The roles of stakeholder orientation and financial transparency. Journal of Accounting and Public Policy, 33(4), pp.328-355. • Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson Higher Education AU..

17. References • Ioannou, I. and Serafeim, G., 2017. The consequences of mandatory corporate sustainability reporting. • Laudon, K.C. and Laudon, J.P., 2016. Management information system. Pearson Education India • Leipziger, D., 2017. The corporate responsibility code book. Routledge. • Luo, X., Wang, H., Raithel, S. and Zheng, Q., 2015. Corporate social performance, analyst stock recommendations, and firm future returns. Strategic Management Journal, 36(1), pp.123-136. • Lys, T., Naughton, J.P. and Wang, C., 2015. Signaling through corporate accountability reporting. Journal of Accounting and Economics, 60(1), pp.56-72. • Nobes, C., 1998. Towards a general model of the reasons for international differences in financial reporting. Abacus, 34(2), pp.162-187. • Penman, S.H., 2007. Financial reporting quality: is fair value a plus or a minus?. Accounting and business research, 37(sup1), pp.33-44. • Pratt, J., 2016. Financial accounting in an economic context. John Wiley & Sons. • Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA. • Warren, C.S. and Jones, J., 2018. Corporate financial accounting. Cengage Learning.

18. About us • In this presentation, we examined current issues in accounting and finance. We are also providing accounting and finance writing help to students who are able to buy research papers online for their university projects.