Current State and Future Direction of International Accounting Standard Setting - Example

Part 1 The primary objective of the business is to maximize the shareholder’s value and the entire process of carrying out activities need to be developed in such a manner that the owners of the business gain. While looking to maximize the shareholder’s value important consideration has to be given towards abiding with the social responsibilities like protecting the consumers, ensuring fair wages, proper hiring of the employees, supporting the environment and the society and others which needs to be examined. This at times could lead towards distress situations where selecting whether the business should maximize the value of the stakeholders or remain ethical is a major issues. This is clearly being witnessed in the case as if the information regarding the shutting down of Universal Bank is not brought to the notice would lead towards impacting different stakeholders like the shareholders, employees, investors and the society on the whole which is associated with the business in some aspect or the other. Disclosing would mean passing insider information to the management and others which is wrong and is an ethical issue which needs to be examined. This will thereby result in complicating the situation as selecting the mechanism which has to be selected is a different proposition. Disclosing information would mean that different stakeholders like shareholders, employees, investors and the society will be impacted as the decision would lead towards financial loss. The closure of the bank would also mean that the employees will lose their job, the investors will lose the money they have invested in the business and would lead towards negative connotation and impact for the society (Poitras, 2004). This thereby instead of multiplying the shareholders value would lead towards loss for the business and will thereby have a negative impact on the future potential. Disclosing the information will protect the different stakeholders as correct information will be provided at the correct time. This will provide an opportunity where correct steps can be taken and the business will be in a position through which stakeholders will be protected (Tony & Kerry 2007). This will have an impact on the ethical consideration which needs to be considered as it will lead towards passing insiders information to outside parties. This will thereby have an impact on the future performance and will impact the manner in which different decisions need to be taken within the business. To deal with the present situation it is imperative that the business aims towards disclosing the information as it will lead towards passing on the insider information so that the interest of the different stakeholders are protected. This will safeguard the stakeholders against different risk and will provide the required fundamentals and directives through which better control will be exercised and the interest of people will be protected. The business needs to take decisions which look at protecting the interest of the stakeholders so that the owners of the business are able to gain from the deal. This has to be matched by the growth and development of directives through which interest is protected and while looking to do so the different social responsibilities need to be achieved. Part B The value of money changes over a period of time due to the different economic conditions which the economy undergoes. A economy might at times undergo inflation while at other time undergo deflation which will thereby make the value of the money to change over a period of time and the movement depends on the manner money movement is seen. This aspect looks at analyzing the manner in which the value of money changes over a period of time and analyzes the manner in inflation also results in a change in the value of money. To begin with the discussion it is important to understand that the paper will look to talk about fiat money which is one where the willingness of the people determines the demand and supply of money and the government is the sole authority which issues money in the economy. This thereby has an impact on the overall money supply which is available in the economy and determined the manner in which the value of currency will change over a period of time. The manner in which inflation causes changes in the value of money over a period of time can be seen from an example. Suppose that $100 fetches 20 kg of apple. The economy due to excess demand is witnessing that more and more money will be required to purchase the required apple. Now suppose that the rate of inflation is 4% means that $104 will be required to purchase the same quantity of apple. This shows that value of the currency depreciated and more and more currency will be required to purchase the same quantity of apple. This thereby highlights the manner in which different aspect has a role in impacting the value of the currency over a period of time. An important aspect which can be analyzed to understand the manner in which value of money changes over time can be seen from the principle of time value of money. Suppose that the business expects $1000 to be earned in the next 5 years. To earn $1000 the business will require investing $2500. Now suppose the discounting rate is 10% which can also be considered as the growth rate or the rate of inflation will be used to discount the future value to the present value. The formula which is used is FV / (1 + n) i This will determine whether the investment will be better or not and investing will be beneficial for the business or not. This will thereby ensure that the process will look at identifying the manner in which the value of currency has changed over a period of time and has either increased or decreased based on the market condition and the demand and supply of currency and goods in the market. Changes in the value of currency also results in having a different impact on the business decisions as it creates the required opportunity through which investments are garnered. People are willing to invest when there is a slight inflation as during that period the value of the currency increases and the investor is able to get a higher return for the investment. This thereby ensures that the process loos at providing the required dimensions and fundamentals through which the business experiences better gains. Now looking at a cause where the development of the economy helps to provide the required dimensions through which value of the currency increases. This becomes possible due to the change in economic growth rates which provides an alternative through which people investing money in the business is able to get better returns. The overall aspect thereby helps at strengthening the manner in which different business decisions are taken and helps to create the required environment which provides an opportunity of additional returns for the business thereby contributing positively towards the growth of the economy. In a similar manner while looking to find out the manner in which the value of currency has changed over time a fundamental which looks at analyzing the rate of inflation can be used. This process will look at identifying the important baskets which needs to be considered while making purchase. The comparison is made between the goods which are purchased in the base year and the extra money which people have to pay for purchasing the same is identified. This thereby helps to find out the manner in which the value of currency has changed and helps to identify the mechanism which has resulted in making people purchase different products over time. The change in the value of currency is also impacted due to external environmental factors as it impacts the demand and supply which thereby has an impact on the rate of inflation and decides the amount of goods and services which will be purchased. The change in the value of money can further be seen regarding the manner in which purchase price of different goods and services have been impacted (McGregor, 2009). This has impacted the purchasing power parity and brought about a complete change regarding the manner in which different activities are carried out. The change in the value of current occurs due to the impact of different factors out of which inflation is one but the magnitude of impact it will have on the prices is an aspect which needs to be considered so that the manner in which price and value of currency changes can be evaluated. Thus it is seen that the currency value changes over a period of time and inflation is one aspect which has a role in shaping the manner in which goods and services will be demanded. Understanding the different variables and developing a path which looks at finding out the manner in which currency value changes will help to develop the required fundamentals through which better business decisions will be taken. This will also help to understand the impact currency value on the growth of the economy and will create a framework through which better control over prices can be exercised. References McGregor, W. 2009. An Insider's View of the Current State and Future Direction of International Accounting Standard Setting. Accounting Horizons June: 159-168. Poitras, G. 2004. Share Holder wealth Maximisation, Business ethics and social responsibility, Journal of Business Ethics; 13 (2), 125 Tony, I. & Kerry E. 2007. A review of the two main competing models of Corporate Governance: The Shareholder ship model versus the Stakeholder ship model; Corporate Ownership and Control, 5 (1), 35-67 Read More