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Regulation Of Accounting Essay

4643 words - 19 pages

Nottingham University Business School
MSc Programmes

[N14B28—International Accounting]

Comparison of Accounting Standards in UK and Japan: The Case of BAE Company and Fujitsu Company

GROUP MEMBERS:
[Qianni Ouyang]; ID: [4118036]
[Anqi Shao]; ID: [4121763]
[Gurpreet Singh Sethi]; ID: [4148275]
[Xinfang Zhang]; ID: [4147673]

COPY [2]

I. Introduction
With rapid development of globalization, a great deal of attention is paid to accounting diversity in different countries. However, for managers and investors in the globally economic market , it is significant for them to understand the underlying factors influencing accounting reporting and disclosure practices, the ...view middle of the document...

Part of the social cultural environment, including political, economic, legal, science and education, is an important constituent accounting environment. The social culture contains the established social order, the traditional thought habit of the public, the values and the behaviors of the individuals in the society, which all have impact on the people’s attitudes and perceptions to the financial and accounting. (Franke, R. et al, 1991). In this case, certain elements of the social culture relative to the accounting system are taken into account, such as legal system, providers of finance, taxation, and the profession.

Company law exerts the primary impact on UK companies financial statement. The economic system of the United Kingdom is capital market-based financial system, which is formed by limited liability companies. The economic system determines that the accounting information serves the shareholders of the corporation rather than the creditors and government. In the legal environment, UK’s economic legislation belongs to the civil law system. The company law is an important foundation of the UK’s accounting mode. It contains disclosure requirement and presentation and measurement rules, which apply to any UK limited company. The company law put forward a ‘true and fair view’, to regulate all the accounting behaviors. The accountancy profession that was a founder member of the International Accounting Standards Committee (IASC) has had impact on the regulation of financial reporting.

Comparing with UK, the economic system in Japan is the government-dominated market economy. The government can intervene and control the enterprises’ operating activities directly. The accounting information, which is provided by the listed companies mainly, serves the macro-economic management of the central government. In the legal environment, Japanese economic legislation belongs to the civil law system. The government intervenes the micro-economic principle directly by legislation. To a certain degree, the accounting standards of Japan have a legal effect. Japanese companies rely heavily on the banks and other financial institutions. The heavy involvement of the banks and the long-term nature of share ownership means that there is less focus on short-term earnings information in Japan than in the United Kingdom.(Nobes and Parkers,2008). The government and creditors as the main demanders of the financial accounting information.

2.2 Regulatory Framework
For UK and Japan, different regulatory frameworks stem from different environmental factors mentioned above.

The regulation of accounting in U.K. involves the government, the profession and the oversight mechanism. The government regulates the statutory elements of the framework. The Consultative Committee of Accounting Bodies (CCAB) supervises their members for maintenance of accounting standards. The Professional Oversight Board oversights the profession (Elliot, B. and Elliot, J.,...

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