Essay: Reporting of Financial Instruments

Essay: Reporting of Financial Instruments
08/06/2011 Comments Off on Essay: Reporting of Financial Instruments Academic Papers on Business Studies,Sample Academic Papers admin

Sample Essay

The public interest theory implies that regulations and standards are set based on public demand and in public interest to eliminate or correct any inadequate accounting practice (Belkaoui 2004). The issues identified in the article have a direct relationship with the public interest theory of accounting as standard setting bodies are working for convergence of standards and amendments to fair value standards after much demand from the public. The high public demand for amendments in fair value standards is mainly due to problems in interpreting financial statements based on fair value measurement and reporting of financial instruments on irrelevant historical values.

The convergence of international standards is stressed by the general public to eliminate any differences in financial statements applying a different set of accounting standards. The interest group theory of accounting implies that standards and regulations are formulated in response to special interest group demands (Gore 1992). The special interest groups highlighted in the article are banks and accounting firms who can influence standard setting bodies to formulate favourable accounting standards and regulations. The banks have been critical of fair value measurements since the standard was first formulated and would resist any amendments to fair value standards which are unfavourable.

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