Regulatory Capture Theory and Environment †MyAssignmenthelp.com

Question: Discuss about the Regulatory Capture Theory and Environment. Answer: Introduction As stated by Bryce, Ali, Mather (2015), the various facets of financial regulation are recognised with certain requirements, guideline and restrictions required to maintain the integrity of the financial system. These regulations may be both government or non-government. In addition to this, the financial regulations have been able to influence the main structure of the banking system by increasing the variety in the financial products available. The different considerations of the report have been able to state on the literature review of the Australia and the U.K.s regulatory requirement for reporting of financial aspects. The main discourse of the study has included the individual regulatory environment which has reflected the perceived difficulties of the regulatory environment of the selected countries. The report has also stated that the way regulatory environment operates is dependent on the major decision makers. The main discussion of the study has been related to the legis lations applicable. The important aspects of the report have also assessed the financial regulatory environment with Regulatory Capture Theory. This has been stated with the different elements of the theory and state why this theory is important in the practical implementation. Some of the important learnings of the study has focused on the characteristics which may indicate the that a regulatory environment might be captured (Yu Wahid, 2014b). The perceived problems of each system The IFRS regulated in Australia is considered with the motive to improve the overall standards, comparability, accuracy and transparency of financial statements for a company within a particular period. Despite of the given considerations the adoption of IFRS in Australia is seen with several challenges which includes lack of training, problem for the entities, auditors, regulators as well as the interesting parties who are familiar with previous accounting standards (Laux Stocken, 2017). The aspects as considered as major source of problems for the IFRS implementation. Some of the different types of other problems has been considered with IFRS compliance to the legal and political environment which has been considered as the major challenge. In several other instances the information presentation has been seen to be the key challenge. The presentation of the information is depicted with relevant understanding of the technical knowledge which has been a major challenge for the adopt ion of the IFRS regulatory framework for Australia (Yu Wahid, 2014a). There have been several instances which has shown there has been delays in the implementation of the new IFRS standards. Some of the main challenges are concerned with the slow endorsement process. The European Financial Reporting Advisory Groups (EFRAG) has depicted the early involvement of the new standards, this had early involvement of the arguments and debates which were aired in Europe. In responses to Philippe Maystadts enquiries about IFRS in 2013 on behalf of the Commission, depicted Europe as a standard body for modifying the international standards may pose problems in implementing new standards at later stages (Krahel Titera, 2015). In addition to this, the implementation of the IFRS 2 Share-based payment has decreased the profit by 2.38% and IFRS 5 Discontinued activities and assets held for sale has reduced the profit recognition from these assets by 0.35%. There have been several empirical evidences which has shown adoption of IFRS on group accounts has impacted on reported net profit and on the equity of large listed companies. In cases where there is disposal of subsidiary, the goodwill is not recycled back into profit or the taken into consideration for the loss on the disposal calculation. These results were taken from major impact to the sample companys profit. The remeasurement during the adoption of IFRS caused several technical breaches in the term loans which were written in form of rolling GAAP (Ijiri, 2018). Working of Regulatory Environment AASB is identified as an agency of the Australian Government. The various types of the AASB standards are known as Australian Accounting Standards and include Australian equivalents to International Financial Reporting Standards (IFRSs). The IFRS was first adopted as Australian Accounting Standards, the AASB made some modifications to IFRSs, including removing some options and adding some disclosures. In 2007, AASB was seen to make changes in the Australian Accounting Standards to include the relevant standards which were identical to IFRSs as issued by the IASB for profit making entities. The various types of the disclosures are also compliant with the non-IFRS compliant requirements which are applied for the not-for-profit and public-sector entities. The introduction of the differential reporting system Australian Accounting Standards Board (AASB) in July 2010 was aimed to Reduced Disclosure Requirements' (RDR). The various types of requirements as per the RDR entitled to track the recognition and measurement requirements for all Australian Accounting Standards (which are equivalent to IFRSs), but with reduced disclosure requirements. As discussed by Ali, Akbar, Ormrod (2016), the significance of the variations to the company law after the implementation of EU accounting directives, it has been made mandatory to make the amendments to UK and Republic of Ireland (ROI) accounting standards for ensuring sustained uniformity among the legal framework and financial reporting. This has further provided financial reporting from work the opportunity to consider the most appropriate accounting standards to support the new micro entities regime. The different modifications to the company law for accounting predominantly affects small company regimes and various types of minor amendments passed| as per UK and Republic of Ireland accounting standards. It is further observed that the company law recognizes that the financial reporting framework namely IFRS and UK and Ireland GAAP (generally accepted accounting practice). The publicly received companies are required to apply IFRS for the preparation of group accounts and the entities are free to choose between IFRS and UK and Ireland GAAP for the preparation of their individual parent accounts. The UK GAAP is made up of five regimes, three of which are available within FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. The financial relations are mainly seen to be applicable for micro entities regime, small entities regime, FRS 102 and EU adopted FRS (Christensen et al., 2015). Countrys progress towards the adoption of IFRS The effective date of IFRSs implementation in Australia is seen to be done from 1 January 2005. In this date AASB began the review for the adoption to assess the ongoing relevance of IFRS to the Australian for-profit and not-for-profit (NFP) reporting entities. In majority of the sectors the transition process was designed to be smooth. IFRS was considered as an appropriate measure for the NFP standards which is developed by the AASB. Despite of these facts, there has been several scopes for ramifications which are needed for ensuring quality and cost-efficiency of reporting. IFRS adoption Nvidia sectors has allowed the preparers of the report to switch between countries and sectors with transferable skills and knowledge. The different types of internationally active entities have adopted the standard across all the sectors which has enabled the users and preparers of the report to adhere to new standards especially as per the disclosure requirements (Standards Australia, 2016). The initiation of the UK accounting standards was issued and developed by Accounting Standards Board (ASB) from 1 August 1990. However, on 2 July 2012, the FRC Board assumed responsibility for setting accounting standards. Most of the accounting standards were seen to be developed by the ASB which is also known as Financial Reporting Standards (FRSs). Some of the most noted standards include FRSSE (Financial Reporting Standard for Smaller Entities). FRSs are first usually issued as Exposure Drafts for consultation that are known as Financial Reporting Exposure Drafts (FREDs). It needs to be further observed that on November 2012 FRC introduced new standards as part of a new UK GAAP framework. The new framework originated with FRS 100: Application of Financial Reporting Requirements and FRS 101: Reduced disclosure framework. In 2013, the FRC published standards for setting out the reporting requirements for FRS 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland. In 2014, new sets of standards relating to FRS 103: Insurance contracts was introduced. In addition to this, in 2015 the financial reporting standards FRS 100, 101, 102 and 103 (known as new UK GAAP) are effective from 1 January 2015. These FRSs replace existing financial reporting standards issued by the FRC for reporting periods starting on or after 1 January 2015. In this year, the FRC introduced two new standards with FRS 104: Interim financial reporting (issued in March 2015) and FRS 105: The Financial Reporting Standard applicable to the micro-entities regime (issued in July 2015) (Wu Zhang, 2014). Regulatory Capture Theory and its usefulness The term regulatory capture theory was coined by George Stigler, a Nobel laureate economist. The regulation of the process was seen to be done by the agencies for the industries requiring attention for regulation. The regulatory theory is considered to be important then the related agencies formed to act with the interest of the public. This notion acts with the means of providing benefits as per the interest of the common public. The regulatory capture theory is recognized as the failure of the government which took place when this agency was created in favour of the public interest or other, commercial organizations having special interests (Loyeung et al., 2016). It needs to be further understood that the public interest agencies are controlled by the changes in the industries which are captured with the agencies. The regulatory capture seen to act with different agencies where the gamekeeper turns poacher. It is further seen that the interest agencies set out to provide support to the ignored who are in favour of the regulatory interest. It is therefore seen that the regulatory capture theory has a core focus on the branch of public choice which is often referred as economics of regulation; and economics in the speciality are critical for the conceptualization of the government regulatory intervention. The main theory of regulatory capture emphasizes on the choice between economic of regulation and economics in speciality which are critical for capturing the risk of the agency. In addition to this, the theories associated to the regulatory environment ensures that different elements are protected from outside influence as much as possible. T he recently done interpretation of regulatory capture theory has been able to provide recommendations on mature democracies with high levels of transparency and media which are exposed to increase level of corruptions (Oulasvirta, 2014). Characteristics indicating regulatory environment might be captured The evaluation of regulatory environment may be captured then analysing the literature and identifying the various types of the regulatory environment for the individual countries. The interpretation made with the characteristics of the regulatory environment in Australia has indicated that IFRS in Australia is conducive with implementing the cost savings in preparing financial reports. In several instants, the organizations have benefited from the implementation of the delivery environment and able to comply with the new standards of the exposure draft. These changes have been able to depict on controlling of the industries with the captured agencies. In different locations, the challenge and implementation of NFP standards developed by the AASB which was conducive in implementation of IFRS (Kabir Rahman, 2016). That it would capture theory for the UK accounting standard has been set for an amendment and periodic response of issues which are set by FRC. The scope of authority for regulatory capture is recognized with the accounting standards, issued by the Financial Reporting Council (FRC). The issue of these standards is done as per the UK, Companies Act 2006 (the Act) and Regulations made thereunder, and; the Republic of Ireland, the Companies Act 2014. The important considerations for the preparation of the financial statements is done as per the financial statements which are in accordance to the UK legislations and Companies Act accounts. Some of the other instance of application of regulatory capture theory in the accounting framework adopted by the UK can be seen with effective implementation of the FRS101 which is identified with the standards of Reduced Disclosure Framework. This standard led to some of the most notable ramification in the reduced disclosure framework thereby allowi ng most subsidiaries and parents to use the recognition and measurement bases of IFRSs in their individual entity financial statements, while being exempt from a number of disclosures required by full IFRSs (Financial Reporting Council, 2014). Conclusion The perceived problems of Australia regulatory framework have been identified with lack of training, problem for the entities, auditors, regulators as well as the interesting parties who are familiar with previous accounting standards. The aspects as considered as major source of problems for the IFRS implementation. Some of the different types of other problems has been considered with IFRS compliance to the legal and political environment. Additionally, the presentation of the information is depicted with relevant understanding of the technical knowledge which has been a major challenge for the adoption of the IFRS implementation in Australia. In the UK the remeasurement during the adoption of IFRS caused several technical breaches in the term loans which were written in form of rolling GAAP. IFRS 2 Share-based payment has decreased the profit by 2.38% and IFRS 5 Discontinued activities and assets held for sale has reduced the profit recognition from these assets by 0.35%. There have been several empirical evidences which has shown adoption of IFRS on group accounts has impacted on reported net profit and on the equity of large listed companies. Working of Regulatory Environment in Australia is depicted with AASB standards are known as Australian Accounting Standards which included Australian equivalents to International Financial Reporting Standards (IFRSs). In 2007, AASB was seen to make changes in the Australian Accounting Standards to include the relevant standards which were identical to IFRSs as issued by the IASB for profit making entities. The various types of the disclosures are also compliant with the non-IFRS compliant requirements which are applied for the not-for-profit and public-sector entities. The aftermath of changes to the company law after the implementation of EU accounting directives, it has been made mandatory to make the amendments to UK and Republic of Ireland (ROI) accounting standards for ensuring continued consistency among the legal framework and financial reporting. The report observed that the different modifications to the company law for accounting predominantly affects small company regimes and various types of minor amendments passed| as per UK and Republic of Ireland accounting standards. Countrys progress towards the adoption of IFRS was further seen with IFRSs implementation in Australia from 1 January 2005. In this date AASB began the review for the adoption to assess the ongoing relevance of IFRS to the Australian for-profit and not-for-profit (NFP) reporting entities. The initiation of the UK accounting standards was issued and developed by Accounting Standards Board (ASB) from 1 August 1990. On 2 July 2012, the FRC Board took responsibility for setting accounting standards. Most of the accounting standards were seen to be developed by the ASB which is also known as Financial Reporting Standards (FRSs). Some of the most noted standards include FRSSE (Financial Reporting Standard for Smalle r Entities). As per the depictions made with regulatory capture theory IFRS in Australia is conducive with implementing the cost savings in preparing financial reports. In several instants, the organizations have benefited from the implementation of the delivery environment and able to comply with the new standards of the exposure draft. Furthermore, the scope of authority for regulatory capture in the U.K. is recognized with the accounting standards, issued by the Financial Reporting Council (FRC). The issue of these standards is done as per the UK, Companies Act 2006 (the Act). References Ali, A., Akbar, S., Ormrod, P. (2016). 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