CIMA F1 Syllabus A. Regulatory Environment Of Financial Reporting - Why Regulate? - Notes ^{2 / 8}

How are financial statements useful?

1. You can compare them

   So therefore without regulations, companies could choose ANY accounting practices and so they would be incomparable between each other

2. They should be unbiased

   Regulations prevent managers from being biased and showing their financial information in only the best possible light

3. Useful to the OWNERS

   Companies owners (shareholders) need info to be useful to help them make decisions. Regulations will help with this

Global harmonisation of accounting standards

= Setting bounds to the degree of variation allowed in each country

Businesses increasingly operate across national boundaries and users need to be able to make comparisons between the FSs of entities located in different countries.

Advantage of global harmonisation of accounting standards

1. Easier transfer of accounting staff across national borders

2. Ability to comply with the requirements of overseas stock exchanges

3. Better access to foreign investor funds