Financial information regulation is a restrictive supervision requirement that has provided guidelines that restricts and protect the integrity disclosure of the financial information adhere for the safety of the integrity of any information that may affect the users directly or indirectly (Bamber, Jiang and Wang,2010.Pg.1160.) In any prospect operations and success, knowledge is power hence before attending on any matter that is deemed of essence the fact notion of information is whether the info is relevant to the case in the subject. Wrongful disclosure of financial information is therefore, curbed by the outlined regulations that ensure that every data is disclosed in a disciplined manner, i.e., in the correct way, at the proper time, to the right people and finally the correct place.
I do not oppose disclosure of company information by the managers to the users; however, the main point of concern is the effect of that disclosure. The accounting business environment according to the below three concerned issues raised and discussed by Australian accounting scholars, i.e., the question of the subjectivity of the information and disclosure, biases in reporting and finally own self-personal, informational damage expect and require the high level of confidentiality and integrity in operations(Nobes, 2014, Pg.17.)
It should be known that in a company the regulation in company act, as well as auditing and accounting standards, except that all material relevant information is disclosed to only the intended user confidently. Ideally, it should be known that whenever information is prepared, scrutinized, shared and reveal the aspect of company interest safety should prevail to ensure that no adverse repercussion will befall the company after disclosure of information (Kirkpatrick, 2009.Pg.21.)
The regulation on financial news is so sure that it ensures that only subjective matters of relevance are disclosed and in this case is those which are material in context, and likewise it provides that due diligence and competency is exercised while revealing information to the user. Users of financial information determine what information they need and who is to disclose the information. It is through this that the concern in question is raised, i.e., whether managers are to be regulated on what to reveal (Chan and Watson, 2011.Pg.50.) Allow me to say that there is no harm in reporting and disclosing any information as long as it is done in the right manner and to the intended users.
Company managers are persons who oversee day to day operations of the business. Therefore, they are expected to know all financial information that contributes to and boosts their decision-making process. This, thus, mandates them to access only that information that concerns his operation. However, since every user of information should access and utilize the information for the benefit of the company thus the need to regulate on how the data is disclosed, i.e., by who and to who.
The main concern is whether the manager should be allowed to disclose financial information or regulates (Lai and Shan, 2013.Pg.33.) I wish to say that for purposes of company interest, the manager should be restricted to reveal only that information that entails business operation for instance on profitability, cash flows and liquidity so that he can share the info to the employees and department for operational decision making.
A manager is however restricted by ethical principles only to disclose that information that is deemed relevant to the user who in this case is the internal user. A manager is constrained to withhold confidentiality and exercise due diligence while disclosing company information to the user to safeguard the interest of the company hence he is only limited by the law to disclose information to only internal users who in this case is the company.
The regulation bars him from disclosing financial information to external parties because of fear of the unknown. It does this to prevent the company from potential self-damage whereby the competitors may get the info and use it to exploit the market. This might also cost the company on litigation grounds whereby information may link to the persons using the company hence making the company lose. It is therefore straight that there is the need to regulate the information disclosed by not only the manager but even other parties who disclose information to their intended uses.
Conclusion;
It is therefore apparent that financial and accounting information should be regulated to ensure that only personal, relevant information is reported by the legally allowed parties and of course, the intended user to avoid blames and mitigate risks that might put the interest of the company down. This should be done by outlining what material information is to reach the intended user and who is to disclose the info and finally how is that info going to be revealed.
Professional ethics code of conduct and principles the likes of objectivity, subjection to materiality, due diligence care, integrity, honesty, professional competency, confidentiality and self-responsibility is of very importance since this is what is to guide and direct both the users and the persons disclosing information on how they are to utilize and effect the info without inflicting any damage to the company. Company interest should always come first while revealing any information.
Report on Australian Accounting Standard Board Participation In Global Accounting Standard Settings And Its Impact On IFRS And Constituent Users Analysis.
Accounting standard setting is a process that indeed involves teamwork since one party can’t do it alone in any case the parties involved in the background are not the final users of the standards hence need to engage all concerned parties in context, and that is why AASB is always dashed in.
Australia is a country which the Internal Accounting Setting Body has never left aside especially when it comes to matters relating setting accounting international standards. It is among the G4+1 country together with Canada, US and United Kingdom whose contribution and research has never been neglected on matters accounting standard. The sole reason why they are always involved in this setting process and especially Australia is because of their pre-eminent advanced national standard-setting bodies of competent, sound minded, intellectual personnel who have expertise in standard settings due to their upgraded forums and workshop meetings where they exchange ideas as they brainstorm.
Australia influence in standard setting is highly contributed by its corresponding change in economic scale mainly as a result of high profile body that has high level intellectual experienced individuals who have mastered in different fields (Arnold, 2009.Pg.805.) AASB is highly involved in the setting process since they are first consulted for input by International Accounting Standard Board in return they identify the issue, i.e. AASB and research by participating individuals and local Australian organization wherein return they get feedback and call for discussion with IASB. Hence AASB contributes to its study for documentation to a point whereby they concurrently reveal IASB research (Deegan, 2013.Pg.7.)
After that, the final standard or rather a pronouncement is made by AASB to IASB for awareness and education enrichment awaiting post-implementation review. Generally AASB task on accounting standard is accepting the strategic oversight directives then identify the issue in query, do research and consider the problem of course engaging both IASB and other Australian local organization as well as specialist, then provide documentation of the findings to form standard reporting that is made aware to the user as IASB does the final review.AASB is entirely considered in standard process setting (Durocher, Fortin and Côté, 2007.Pg.33.)
Countries that are members of IASB are seen not to use IFRS mainly because most of IFRS is the adoption of GAAPS and local known accounting standards hence no need of using IFRS because you will be having the application of similar regulation than the one you have since this is an upgrade of GAAPS that was found earlier than IFRS. Likewise let it be known that it is so expensive to shift from GAAPS or any other standard to IFRS especially on training cost, system installation and maintenance cost. The other primary reason why it is not used is that it is based on principle and not rules hence a loophole for controls and efficiency (Ahmed, Neel and Wang, 2013.Pg. 1350.)
IFRS are somehow viewed by these countries that do not need them too far below the level of the current present used standards hence find no reason of shifting. It is therefore clear that member states of IASB do not trust and are not contempt with what IFRS offer considers hence no reason for adopting it (Soderstrom and Sun,2007.Pg.700.) It does not mean that it is by default that IFRS’s are adopted no, it is because does not meet the need of the users hence if it is upgraded these people with other standards would opt to choose it. It is similarly expected if there were any other regulations whose rules supersedes that of GAAPS.
(iii) Owners Equity Analysis.
Our question focuses on the analysis of owners’ equity for four listed companies in Australia. In my illustration have chosen four companies in the energy sector that are listed on the Australian Stock Exchange. These companies are; A-Cap Resources Limited, Abilene Oil and Gas Limited, Oil Search Company Limited and finally Samson Oil & Gas Limited.
The first company to be subjected in equity analysis is A-Cap Resources Limited whose annual general reporting analyzed is for the year 2017,2016,2015 and 2014.
A-Cap Resources Ltd Owners Equity;
2013 2014 2015 2016
“000” “000” “000” “000”
$ $ $ $
Share Capital 54783 60204 62818 66794
Retained Earning/Reserves (397) (462) 6978 6015
Less any drawings/losses (16267) (18301) (19950) (19627)
Owners’ Equity 38119 41441 49846 53182
Over the four years, the period in A-Cap Ltd Owners equity is seen to progressively increase by averagely 8% for period 2013-2014, by 17% in the year 2014-2015 and 7% for period 2015-2016. This increase is averagely contributed by return on equity which ideally is seen to illustrate that progress there has been the steady increase in cash flow on the company assets thus leading to the rise. However, the Roe position for the four years is only benchmarked better in the year 2014-2015 since it is within the limit recommended (Hoskin, Fizzell and Cherry,2014.Pg.35.)
The second company to be subjected to equity analysis is Abiline Oil, and Gas Limited whose annual general reporting analyzed is for the year 2017, 2016, 2015 and 2014.
Abilene Oil and Gas Limited;
2014 2015 2016 2017
“000” “000” “000” “000”
$ $ $ $
Share Capital 62102 63221 64141 64101
Retained Earning/Reserves 9277 9462 9701 9431
Less any drawings/losses (62675) (65381) (69345) (72570)
Owners’ Equity 8704 7302 4497 962
Abiline Oil Ltd company owner’s equity has not been in a stable state due to the problem of cash flows hence the cause of the decrease. Management performance over the time has led to owners withdrawing their shares as a result of the losses Alibine has been making losses out of mismanagement forcing some of the owners to feel that there is no value of their money hence withdrawing their shares (Robb and Robinson, 2014.Pg.170.)
The third company to be subjected to equity analysis is Oil Search Company Limited whose annual general reporting analyzed is for the year 2017, 2016, 2015 and 2014.
Oil Search Company Limited;
2013 2014 2015 2016
“000” “000” “000” “000”
$ $ $ $
Share Cap 3147 3147 3147 3147
Retained Earning/Reserves (149) (1889) (11.4) 614
Less any drawings/losses (0) (0) (0) (0)
Owners’ Equity 2998 1258 3135 3761
In this case, there is no consistency on the growth of shareholder equity over the four year period this is as a result of lack of subscription of the initial share capital (Chandler, Hikino, and Chandler, 2009.Pg.36.) The way the 2013 shares were subscribed at 3147000 averagely it has remained over the year. Hence there has been no new shareholder recruited nor no new right issue done. The company is also seen to make the loss by the fact that the reserves and retained earnings are affected to be a negative value (Christensen and Feltham, 2012.Pg.21.)
The fourth and last company to be subjected to equity analysis is Oil Search Company Limited whose annual general reporting analyzed is for the year 2017, 2016, 2015 and 2014.
Samson Oil & Gas Limited -;
2014 2015 2016 2017
“000” “000” “000” “000”
$ $ $ $
Share Cap 98340 98296 99523 99643
Retained Earning/Reserves 6578 6273 6204 6720
Less any drawings/losses (53693) (88703) (100070) (102609)
Owners’ Equity 51225 15797 5657 3754
In this case of Samson Oil, the share capital is seen to grow progressively despite the fact there is no reserves increase or retained earnings being reserved in high amount. However this change in both share capital and reserves is profoundly affected by the high value of drawings and losses done with its climax being the year 2016 and 2017 thus reducing the owner’s equity drastically (Dyrda and Pugsley, 2018. Pg.13.)
References;
Ahmed, A.S., Neel, M. and Wang, D., 2013. Does mandatory adoption of IFRS improve accounting quality? Preliminary evidence. Contemporary Accounting Research, 30(4), pp.1344-1372.
Arnold, P.J., 2009. Global financial crisis: The challenge to accounting research. Accounting, organizations and society,34(6-7), pp.803-809
Bamber, L.S., Jiang, J. and Wang, I.Y., 2010. What’s my style? The influence of top managers on voluntary corporate financial disclosure. The accounting review, 85(4), pp.1131-1162.
Chan, M.C. and Watson, J., 2011. Voluntary disclosure of segment information in a regulated environment: Australian evidence. Eurasian Business Review, 1(1), pp.37-53.
Chandler, A.D., Hikino, T. and Chandler, A.D., 2009. Scale and scope: The dynamics of industrial capitalism. Harvard University Press.
Christensen, P.O. and Feltham, G., 2012. Economics of Accounting: Information in markets (Vol. 1). Springer.
Deegan, C., 2013. Financial accounting theory. McGraw-Hill Education Australia.
Durocher, S., Fortin, A. and Côté, L., 2007. Users’ participation in the accounting standard-setting process: A theory-building study. Accounting, Organizations and Society,32(1-2), pp.29-59.
Dyrda, S. and Pugsley, B.W., 2018. Taxes, private equity and evolution of income inequality in the us. Working paper.
Hoskin, R.E., Fizzell, M.R. and Cherry, D.C., 2014. Financial Accounting: a user perspective. Wiley Global Education.
Kirkpatrick, G., 2009. The corporate governance lessons from the financial crisis. OECD Journal: Financial Market Trends,2009(1), pp.61-87.
Lai, C., Lu, M. and Shan, Y., 2013. Has Australian financial reporting become more conservative over time?. Accounting & Finance, 53(3), pp.731-761.
Needles, B.E., Powers, M. and Crosson, S.V., 2013.Principles of accounting. Cengage Learning.
Nobes, C., 2014. International classification of financial reporting. Routledge.
Robb, A.M. and Robinson, D.T., 2014. The capital structure decisions of new firms. The Review of Financial Studies,27(1), pp.153-179.
Soderstrom, N.S. and Sun, K.J., 2007. IFRS adoption and accounting quality: a review. European Accounting Review,16(4), pp.675-702.
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