Finance

Identify and discuss issue*s* relevant to today’s professional financial accountant

All over the world stakeholders use the information provided by financial statements in their decision-making process. Although the use of the information is more or less the same worldwide, the communication of that information can differ according to the location of the company (type of accounting standards used) or other influencing factors (e.g. legal system, development of the capital market, cultural differences etc). Information from the annual accounts becomes useful for decision-making if it can be compared to a certain benchmark. As a result, financial accountants of companies located in countries with accounting flexibility will face more problems comparing the performance of different companies with one another than users of annual accounts of companies located in countries with very little accounting flexibility.

Also, there have been issues relating to the legal system, over the years western world two legal systems have developed namely the common law system and the code law system. The common law system originated in England and is developed from case law some of the common law countries include England and Wales, United States, Australia, Canada, Ireland, New Zealand and Singapore. In common law countries, accounting regulation is in the hands of professional organisations of the private sector. While the code law system originated in Roman law and it is characterised by a wide set of rules that try to give guidance in all situations. Some of the code law countries include Scotland, France, Germany, Belgium, The Netherlands, Portugal, Spain, and Japan. In code law countries the company law is very detailed and accounting standards are often embodied in the company law. Accounting regulation in code law countries is in the hands of the government and financial reporting is in those circumstances often reduced to complying with a set of very detailed legal...