...Chapter 3: The Regulation of financial accounting Why examine theories of regulation? Better placed to understand why some accounting prescriptions become part of legislation while others do not. Accounting standard – setting is a very political process While some proposed requirements may be technically sound and logical, they may not be mandated due to political ‘power’ or influence of some affected parties What is regulation? The Oxford Dictionary defines regulation in terms of a “prescribed rule” Macquarie Dictionary defined regulation as “a rule of order, as for conduct, prescribed by authority; a governing direction or law”. On the basis of these definitions can say that regulation is designed to control or govern conduct Hence, when we are discussing regulations relating to financial accounting, we are discussing rules that have been developed by an independent authoritative body that has been given the power to govern how we are to prepare financial statements, and the actions of the authoritative body will have the effect of restricting the accounting options that would otherwise be to an organisation. ‘Free Market’ perspective Accounting information should be treated like other goods, with demand and supply forces allowed to operate to generate an optimal supply. Arguments supporting ‘free – market’ perspective Private economic – based incentives ‘Market for managers’ ‘Market for corporate takeovers’ ‘Market for lemons’ Private economic – based...
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...LUBS 5016M Financial Reporting and Regulation 2011/12 Module Handbook Module Leader: John Smith SECTION A: basic information ❑ Introduction Welcome to LUBS 5016 Financial Reporting and Regulation. This course is compulsory for MSc Accounting and Finance students. It is taught in the second semester, is worth 15 credits if successfully completed and comprises 10 lectures supported by a series of workshops or tutorials. The course is assessed by means of an examination in May/June 2012 (100 per cent). ❑ Prerequisites There are no prerequisites for this module nor is the passing of this module a prerequisite for any other module. Aims This module is designed to provide students with an understanding of the main economic and political issues that underpin academic and policy-oriented debates about the regulation, purpose and value of financial reporting. Objectives On completion of this module, students will be able to demonstrate knowledge and understanding of: • The international nature of accounting; • Financial statements produced under various systems of income measurement; • The major elements in a conceptual framework for financial accounting and its usefulness to policy makers; • The theories of accounting standard setting and the debates between different schools of theory; • The economic...
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...CHAPTER 2: REGULATION IN FINANCIAL ACCOUNTING Chapter 2 regulation in Financial accounting LEARNING OUTCOMES Upon completion of this chapter you should be able to understand: • The difference between management and financial accounting. • Why accounting regulations are important and required. • The need for and the structure of professional regulation, company law, stock exchange legislation and EU Directives. • How the different aspects of regulation work together and complement each other. • The process through which an accounting standard comes into being. REVISION RESOURCES EXAM QUESTIONS: Sample and Past papers are available from the website of Accounting Technicians Ireland and are essential aids when studying Advanced Financial Accounting topics. 7 Chapter 2 : Regulation in Financial Accounting 2.1 Advanced Financial Accounting the FunCtion oF FinanCial aCCounting and reporting The International Accounting Standards Board (IASB) in their Conceptual Framework for Financial Reporting state that ‘the objective of general purpose financial reporting is to provide financial information about the reporting entity that is useful to existing and potential investors, lenders and other creditors in making decisions about providing resources to the entity. Those decisions involve buying, selling or holding equity and debt instruments, and providing or settling loans and other forms of credit’. This Conceptual Framework...
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...Although the circumstance in which it arose differed considerably, when coupled with the current financial crisis and its revelations of unethical practices, it is filled with irony. It is in this context that the report will adopt the position of internationl mandatory regulation as opposed to the voluntary option. For these ends it will employ several actors such as the Global Compact in order to demonstrate the organisations who are leading the way in Corporate Social Responsibility. However, as the report will show, due to its predatory nature, financial sector requires more than voluntary organisations. The crux of the argument is that regulation needs to be international due to the interconnectedness and interdependence caused by globalisation, and it needs to be mandatory due to the predatory nature of the financial system. Introduction: In light of the 2008 financial crisis, this report will argue for international mandatory regulations in the financial sector to enhance its Corporate Social Responsibility (CSR). The banks for International Settlement and the Basel Committee have made positive steps to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide (Banks for International Settlement , 2012, [Online]). However, the crisis of 2008 and its devastating effects, not only showed that more effective mandatory regulation needs to be applied to control a predatory industry that is encompassed by unethical practice;...
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...A FRAMEWORK FOR PRUDENTIAL REGULATION AND SUPERVISION OF THE FINANCIAL SECTOR BY DR. OWEN JEFFERSON Recent developments in the financial sector has catapulted the issue of the safety and soundness of the financial system into the forefront of discussions in Jamaica. While not necessarily providing any consolation for us, it is important to note that this issue has also been plaguing many other countries and has become a matter of international concern. The number of countries experiencing significant banking problems has increased substantially in recent years - hitting industrial and developing countries alike - and the high costs and macroeconomic disruptions caused by banking crises have become a matter of increasing concern to the international financial community. Not since the Great Depression of the 1930's have so many banks failed as in the 1980's and the 1990's. A recent survey by the International Monetary Fund reported banking problems in 131 of its 181 member countries over this period, ranging from outright systemic crises to isolated causes of failing banks. We all remember the collapse of the Bank of Credit and Commerce International (BCCI) in 1990. There was the much publicised savings and loan debacle in the United States which cost some $150 billion. In Latin America, banks in four countries - Venezuela, Brazil, Mexico and Argentina - have recently had to struggle with crises of varying degrees of severity....
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...Briefing Note Introduction In 2007 to mid-2009, the world has suffered the worst financial crisis since the Great Depressions in 1920s. This followed by a wave of economic downturn. Learnt from the crisis, it is suggested that a forceful response by regulators, may help prevent deteriorating further. The objective of this note is to identify the crisis effects on both the financial system and the economy and to provide implications on further financial regulations. Effects Financial System: Many institutions collapsed in the USA and Europe within the period. Figure 1 directly shows a considerable rise of the number of bank failure particularly from 2008 to 2010 in the U.S. This deteriorated the macro-structure of many developed countries. Firms called for ‘bailouts’ or recapitalization from governments to help stabilize the financial system. Or, others were closed, forcibly merged with stronger counterparts, or recapitalized using taxpayer’s money. More effects are given below: 1. Banks have been hit hardly by deteriorating capital & liquidity problems and worsening market confidence. * Global banking sector lost almost half of the capital base at the beginning of the crisis in 2007 (Lybeck, 2011). * Low central-bank interest rate: concerns over deflation by monetary policy makers resulted in long-term low interest rates. Figure 2 presents that in the U.S., a slump of 4% in Federal Funds Rate to nearly zero in 2010 while Bank of England has held rates...
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...Theory and Practice of Regulation of Anti-Money Laundering for Banks and NonBanks Hayford Kwesi Annor Manager, Risk & Compliance/AMLRO, ABii National Savings & Loans Ltd. Doctorate of finance student, SMC University, Switzerland. FAAFM, Ch.FE, ACCPA, MBA, BSc, HND h.k.annor@gmail.com Abstract A deregulated financial sector is free to accumulate and allocate funds from anywhere irrespective of the nature, form, intent and source. Without regulatory oversight, this poses zero risk to banks and nonbanks no matter how they finance the capital structure. In the real world, banking is an outcome of interactions between the regulator and the regulated. Regulatory consequences apply for failure to comply with the acceptable standards of best practices of banking regulation which include fines, sanctions, jail terms and revocation of the banking license for willful or non-willful noncompliance. The physical disposal of proceeds of funds’ from crime with aim of separating same, through creation of layers to disguise trails of the source and make it seem legitimate undermines the integrity of the financial system. It is required of the banking sector to build a comprehensive framework that identifies, assesses, monitors, mitigates and reports perceptions of suspicious activities of money launderers under the discipline of the regulator to avoid being sanction for the related offences. This paper reviews theory to link practice towards money laundering risk assessment...
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...Regulation is any set of rules imposed by governments or agents of governments that seek to change the behavior of economic agents, usually with the objective of improving the economic welfare of the whole community. Financial regulation guides and monitors what financial institutions do and the regulations are there to improve economics stability. In this essay I am going to look at two different types of regulations, rules and principles based regulation. Rules based regulation brings about compliance cost for firm and monitoring costs for regulators, while, principles based regulation (PBR) relies more on ethical behavior and transparency of business dealing. Also I going to look at financial regulators, who they are and what their duties...
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...THE IMPACT OF FINANCIAL REGULATIONS ON MERGERS & ACQUISITION OF BUSINESSES. Presented By Kofi Frimpong-Aninakwa To Dr Jeffrey Glover California Intercontinental University September, 2014 Abstract In the current global economy, corporations do businesses within their domiciled countries or have become transnational and have to perform at a multinational level. In order to achieve such expansion, corporations acquire other companies or merge across their borders commonly called Mergers and Acquisition (M & A). These large corporations are publicly owned, listed on stock exchanges or alternative markets around the world. They also engage in M&A activities that are thoroughly regulated by governments to protect the shareholders of target companies. The laws and regulations governing M&A are very complex and strict. High levels of expertise and specialist advice are required, and corporations use several teams of lawyers and accountants who specialize in the jurisdictions involved in M&A. In September 2006, the Regulations on Foreign Investors’ Mergers and Acquisitions of Domestic Enterprises came into force in China, as a direct result of an increase in M&A transactions and the general opening up of the country. Such transactions are seen as a vehicle to secure shareholders’ interests. The main agenda stimulating the business combinations such as the merger or acquisition of a company by...
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...Financial Laws and Regulations DeVry University HSM 340 Professor Black Financial Laws and Regulations 1) There are five elements that pertain to the establishment of a false claim under the false claims act. The first element that is identified by Cleverley et al (2011, p.90) is that the false claim act is that the claim, either to receive payment or to not pay the government, must be established as false. The second element that Cleverley et al states is that must be identified is that the claim was submitted knowingly that it was false. The third element that they identify is that the false claim can be submitted even in deliberate ignorance. The fourth element is that the false claim can be submitted with disregard of the claims falseness, or truth in recklessness. Lastly Cleverley et al explain that the person, or persons, that file a fraudulent claim will be liable for $5,500-$10,000 per claim, plus up to three times the damages to the federal program. 2) The three broad objectives that HIPAA privacy standards were designed to accomplish are firstly to force any entity that has private health identifying information available to be forced limit use and to use that information wisely. What this means is that another medical facility, or lawyers office cannot just call/fax requesting information and require for it to be released without a signed consent form. Secondly, set specified standards as to the patients’ rights to keep their information private. An example...
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...Since the 1970s financial regulators around the world have increasingly focused on introducing Anti Money Laundering (“AML”) measures to fight organised crime and tax evasion. While several national and international acts have set a legal framework for enforcement, the terrorist attacks on 11th September 2001 (“9/11”) have established fighting terrorist financing as another major objective among regulators. In subsequent years AML measures have constantly been revised to adjust to the complexity of the international financial markets. As a result financial institutions have to cope with additional costs, more difficult customer relations and legal as well as geographical constraints. More comprehensive customer due diligence and complex mandatory monitoring system in particular cause difficulties for the banking sector. Consequently several big institutions such as HSBC and Citigroup have already been fined for failing to comply with AML laws. Regulations have changed the financial sector. This essay will analyse the impact of the 9/11 attacks on the regulatory framework as well as the effects of AML on the financial industry. Page 3 of 16 2. MEASURES TAKEN AML has been on the agenda of regulators well before 9/11. However, the actions of prosecutors were more focused on fighting organised crime, drug and weapon dealing as well as tax evasion. 9/11 shifted the attention towards fighting terrorism and initiated Counter Terrorist Financing (“CTF”) laws. It was not until 9/11...
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...(2008), “financial regulation is a form of supervision, which subjects financial institutions to certain requirements, restrictions and guidelines, aiming to maintain the integrity of the financial system. The regulatory body may be handled by either a government or non-government organization”. The Jamaican financial landscape consists of various financial institutions. These include banks, security brokers, pension schemes and insurance companies. The main objectives of the financial regulator are usually: • Market confidence – to maintain confidence in the financial system • Financial stability – contributing to the protection and enhancement of stability of the financial system • Consumers’ protection – securing the appropriate degree of protection for consumers. • Reduction of financial crime – reducing the extent to which it is possible for a regulated business to be used for a purpose connected with financial crime. With the objectives being outlined, the Bank of Jamaica is the Central Bank of Jamaica that carries out the government’s financial regulation and supervision pertaining to all banks’ operations. The Bank of Jamaica, established by the Bank of Jamaica Law (1960), began operations in May 1961. The establishment of the Central Bank was in recognition of the need for an appropriately regulated financial structure to encourage the economy’s development process after independence. Although the Bank of Jamaica carries out the financial regulation of the Jamaican...
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...| To: | Mr. Bob White | From: | Steven Proctor | CC: | | Date: | 9/12/2013 | Re: | Medical Coverage Survey | | As you requested, information was gathered to determine the employee’s attitudes toward the company’s current medical coverage. Out of 105 employees, 89 returned the six question survey to us. After analyzing the results, the responses were organized into three groups—single individuals (30 employees) individuals with one dependent (21 employees), and individuals with two or more independents (38 employees).Breakdown of Employee Survey ResultsQuestion 1: Which type of coverage is best?34.8 % of the employees agree that employee only coverage is best and 65.2 % of the employees feel that family plan coverage is best. As you can see, the majority of single employees, employees with one dependent, and employees with two or more dependents would prefer to have family coverage. Question 2: Which coverage should be available? 100 % of employees agreed that basic medical, major medical, and hospitalization coverage should be available. For other coverage options, 67.4 % of employees would like to have both dental and optical coverage available and 53.9% of employees would like to have prescription coverage available. Question 3: What limit should policy place on out-of-pocket expenses? With a majority decision, 73% of employees would prefer to have the out-of-pocket expenses limit set at $500. As for the rest of the employees preferences, 19.1% chose $1,000...
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...The False claim act is a law that inflicts liability on an individual or company that takes advantage of governmental programs. With the False Claim Act individuals are able to recover money stolen through fraud (False Claims Overview, 2014). According to the Office of Inspector general in order to qualify for financial incentives a state’s false claim act must: • Establish liability to the state for false fraudulent claims • Contain provisions that are at least as effective in rewarding and facilitating qui tam actions for false or fraudulent claims as described in the FCA • You must contain a requirement for filling an action under seal for 60 days • Finally you must contain a civil penalty that is not less than the amount of the civil penalty (State False Claim Act Reviews, 2014). The Health Insurance Portability and Accountability Act (HIPAA) was designed to protect patient privacy. The three objectives that HIPAA was designed to accomplish are: • Determine the circumstances in which protected patient health information is used and disclosed • Establish individual rights in regards to protected information • Ensure that administrative safeguards are adopted to ensure the privacy of patient information Stark law forbids a physician from making certain referrals for certain designated health service (Physician Self Referral, 2014). Ten specific DHS services are as follows: • Clinical laboratory services • Physical Therapy services • Occupational Therapy services ...
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...False Claims Act The False Claims Act was established to prevent intentionally inaccurate claims against or to the government for property or money. This applies to all federal programs, although it is applied to health care most frequently due, in part, to the large dollar amounts involved1, but also to the volume of claims regarding health care made to the federal government each year. There are five elements pertaining to the establishment of a false claim under the False Claims Act; 1) a claim for property or money is made; 2) the claim is against or to a department or agency of the United States; 3) the claim was false, fictitious or fraudulent; 4) the organization, or persons representing the organization, must have known at the time that claim was false, fictitious or fraudulent; and 5) the false, fictitious or fraudulent claim was material.2 Qui Tam. When an individual (relator) brings a lawsuit against an organization claiming violation of the False Claims Act, this is considered a “qui tam” action. A relator’s knowledge, used to bring about a qui tam suit, “must not be public knowledge but information that would not otherwise be available without the qui tam suit.”1 The relator, often referred to as a “whistleblower”, receives a portion of any settlement amount dictated by the results of a qui tam suit. This incentive was established by the False Claims Act and encourages individuals to assist the government in identification of fraud.1 HIPAA Privacy Standards ...
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