Accounting and Financial Reporting in the UK - Assignment Example

Accounting and Financial Reporting in the UK Since the last decade, the world is facing the negative impacts and disastrous effects of globalization and economical crisis, which are spreading its adverse effect in all parts of the world. This disastrous impact, however, is far greater than stable and well-flourished economies as that of the United Kingdom where the influence of economic recession has done tremendous damage to the economy and stability of the country. As to counter these effects, the government agencies and economists around the world are putting all the efforts to mitigate the adverse impacts that have put the future of the entire world at stake. In order to minimize the influence and impacts over the world's economy, researchers are working to find out the basic grounds, causes, and the dangers involved in giving rise to this global disaster. The damages and losses due to this effect is beyond the count as the damage is in not only monetary terms but also it has induced stability issues throughout the world. This has resulted in certain issues related to accounting and financial reporting as well across the globe. Economic experts and researchers have studied, analyzed, and investigated the factors that are detrimental in deciding the future of organizations and companies across the globe (Manning & Nothwehr, pp. 23-29, 2008). These factors have the tendency to bankrupt any organization completely by using different means such as cheating in accounts and financial sectors. The studies made have indicated a variety of different factors that can result it issues damaging any organization. Some experts have accounted factors such as amateur practices involved in rendering pointless salaries to the upper hierarchy of any organization such as the CEO, etc (Aitken-Davies, pp. 1-2, 2008). This factor has resulted in certain issues that yielded in enormous damages to organizations. However, the other schools of thought account that the most significant issue in this regard is the lack in providing and extending cooperation by the government and governmental agencies that has given rise to economical crisis. In short, economic experts have indicated the fact that in order to achieve the short-term goals, objectives, and profits the organizations suggests handsome but illogical salaries to the employees in upper hierarchy that results in exponential decrement in the assets of organizations (Norton & Porter, pp. 19-37, 2009), and therefore, the organization meets tremendous financial crisis. These financial crises usually bring the long-term losses and damages along. Experts that agree to both of the above-mentioned studies have indicated that all these factors result in issues that are disastrous for organizations (Saudagaran, pp. 50-52, 2009). These disastrous effects deriving from the factors affect the organization by finding certain loop holes in the rules, principles and regulations of accounting in that organization. Extended studies done on accounting practices and principles have indicated that another issue in this regard is the lack of ethical regulation and moral consideration while devising the accounting structure and then in manipulating the structure (Sorkin, pp. 1-3, 2008). These considerations and regulation accentuated more on getting short-term benefits and achieving the nearest goals by sacrificing on long-term benefits and achievements. This psychology while setting up the accounting pillars of any organization in turns results in an enormous financial damage that mostly goes irreparable. Moreover, these considerations not only affect the financial sectors of organizations throughout the world but also the banking sectors. For example, a significant accounting regulation linked to this matter is FAS-157. This regulation has gained much criticism from economic experts ever since the heated discussion on reason behind economic destruction throughout the world started. Economic experts have the opinion that this specific regulation obliged the accounting personnel to present the financial details and discussions to the bank in a magnified and exaggerated form. Experts suggest that this particular factor resulted in the worsening of economical crisis around the world. Moreover, numerous economic researchers showed that this regulation is very critical and damaging even when viewed from the banking sector's point of view. This regulation holds the criticism for inducing the damages and losses worth millions of dollars (Manning & Nothwehr, pp. 20-25, 2008). A famous newspaper signifies this issue by clearly stating the problem and its effects. The paper states that this regulation shows the alleged rule of fair value, implemented and regulated by the assets and resources of the federal board of accounting standards that plans and devise the regulations related to accounting. It is necessary that particular assets and resources that a company or an organization holds be open to the international market. This refers to the fact (Sorkin, pp. 1-2, 2008) that an organization has to represent the assets or resources by the price it would get by selling it. Other than the regulation of FAS 157, studies have indicated the same goals of the regulation related to marking the market, FAS 115, which performs the regulation of companies in order to carry out certain tasks. There is no doubt to the fact that this regulation has its own benefits; however, it makes the organizations to perform different jobs in a deceptive manner. This probability of handling has indicated severe tendencies of advocating and promoting frauds in an organization. This in turn, affects the organization throughout the world yielding to a global economic recession. Studies have showed that monsters in the business world have utilized this accounting rule by exaggeratingly expose their assets to as high as fifty percent when the actual value was about fifteen percent (Sorkin, pp. 1-2, 2008). In this respect, the issue igniting financial and accounting crisis does not only relates to improper and unethical practices but also to some particular accounting rules and regulations that plays a major role in creating accounting and financial disasters in any organizations. In addition to two afore-mentioned issues, economic experts have showed that there exist certain shortcomings and weaknesses in the accounting system and structure of the organization (Manning & Nothwehr, pp. 40-47, 2008). The existence of these ambiguities enables the accountants on job to take certain advantages from these shortcomings. Specifically, economic experts have indicated the three major factors that give rise to accounting frauds and financial crisis in any organization (Beenen & Pinto, pp. 275-288, 2009). The first major issue in accounting and financial sector is the fact that the companies are facing tremendous troubles in terms of financial departments, which in turn leads the upper hierarchy personnel to engage in certain unethical activities such as defalcation and embezzlement of the funds and assets belonging to the organization or the company. The second issue related to the discussion is the carelessness done while devising the ethical consideration and moral implications in the structure of accounting principles. Due to this, there exist numerous rules and regulations in the accounting system that hold the status of being legal but still they can be a source of providing personal benefits and advantages to the associated and relevant people. The third significant issue resulting in accounting and financial crisis throughout the world is that there exists a very creative and innovative exercise related to accounting practices in any organization. This particular exercise includes systemization of frauds and other ethical and accounting issues in an organizational setup. In particular, for the last few years the major issue is the installment and manipulation of accounting setup with the help of technology and computers, this technological setup is more prone to issues resulting in financial and accounting crises than other setups that previously existed. These computer-aided installed systems in the accounting sector have numerous shortcoming and loopholes that invite the accounting personnel to access these loopholes and achieve enormous benefits from it, following the illegal practices. Hence, another significant issue (Beenen & Pinto, pp. 276-289, 2009) in this regard is the existence of numerous shortcomings and weaknesses in the accounting structure and the system that has increased the occurrence of white-collar crimes throughout the world at an exponential rate. Moreover, the studies done in context of the current issues in accounting and financial reporting has indicated that though it is the fact that there is not any frightening point about the impression of the fair value accounting (Pozen, pp. 45-46, 2009). Nevertheless, devising, execution and monitoring of this notion of accounting have arisen at the most disputable, arguable, and the gainsaying issue in the world facing global economic crisis. In order to conclude the discussion of current issues related to accounting and financial reporting, it is important to account that the paper has highlighted and accentuated on all the substantial and important prospects of the accounting sector. The sectors that are facing enormous criticism and debate due to their tendency and capability of acting as an important positive catalyst for the on-going process of global recession and economic crisis. The issues have resulted in irreparable damage and losses across the world putting billions of dollars at stake and wasting millions of it. However many economic experts have pointed out that there are other significant issues that contribute to the major crisis in financial and accounting terms throughout the world (Duska, pp. 79-81, 2003). These issues relate to the prospects of accounting professions and the legal and ethical consideration associated to it. Nevertheless, it is so evident that the comprehensive understanding of these issues giving rise to accounting and financial reporting crisis would be helpful in minimizing the risks and mitigating the adverse effect related to these issues. It would also be fruitful in eliminating and/or controlling the white-collar crimes, which in turn would be beneficial for the organizations. With respect to the discussion, it is mandatory for the government and the related agencies to take substantial measures in order to nip the evil of accounting and financial crises in the bud. References Aitken-Davies, Richard. (2008). “Accountable Crises.” The Guardian. Issue of October 06, 2009. Retrieved on December 17, 2009: http://www.guardian.co.uk/commentisfree/2008/oct/06/executivesalaries.banking Beenen, G. & Pinto, J. (2009). “Resisting Organizational-Level Corruption: An Interview with Sherron Watkins.” Academy of Management Learning & Education. Volume 8, Issue 2, pp 275-289. Duska, Brenda Shay. (2003). Accounting Ethics. Wiley-Blackwell. Manning, Tim & Nothwehr, Erin. (2008). Regulatory Failures and Insufficiencies that Contributed to the Financial Crisis and Proposed Solutions. University of Iowa Press. Norton, Curtis L. & Porter, Gary A. (2009). Using Financial Accounting Information. Cengage Learning. Pozen, Robert C. (2009). “Is It Fair to Blame Fair Value Accounting for the Financial Crisis?” Harvard Business Review. Issue of November 2009. Retrieved on December 17, 2009: http://hbr.org/2009/11/is-it-fair-to-blame-fair-value-accounting-for-the-financial-crisis/ar/1 Saudagaran, Shahrokh M. (2009). International Accounting. CCH. Sorkin, Andrew Ross. (2008). “Did an Accounting Rule Fuel a Financial Crisis?” The New York Times. Issue of July 01, 2008. Retrieved on December 17, 2009: http://dealbook.blogs.nytimes.com/2008/07/01/blaming-the-bean-counters/ Read More