Roles Of Self Interest In Accounting

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Commonly, profit maximization is offered as the proper objective of the firm. The intended users invest in the firm while keeping in mind the same ultimate objective. In addition, some users have specialised needs and will possess the authority to obtain the information to meet those needs. The “intended users” includes the stakeholders, defined as, all constituencies with a stake in the fortunes of the company. But there is no appropriate definition for the users.

The two main concepts before going into further discussion, the major one is the information asymmetry and the financial reporting decisions. The role of Information in a Market Economy is very important in order to improve operation of capital markets and to improve operation of …show more content…

Financial reporting and its regulation are affected by the self-interest of the individuals involved and the individuals form into groups to help achieve their objectives. Individuals are involved in the standard setting process scope for self-interest to get in the way of “neutral and unbiased” accounting regulations the individuals that will be regulated by the new accounting standards can have an impact on the standard setting process. The adverse economic and social consequences must also be considered.

The IASB “cooperates with national accounting standard setters to achieve convergence in accounting standards throughout the world”. Furthermore, the AASB has a specific function “to participate in and contribute to the development of a single set of accounting standards for world-wide use”. Australia has adopted the International Accounting Standards in January 2005 and it was the First country in the world to make such a statement. Since the standards was harmonized and therefore the situation became very …show more content…

The public expects these groups to pursue their interests and attempt to influence the process. The accounting standards are developed having regard to social and economic consequences. Thus, the Public interest theory ignores the principle of self-interest completely. But, the regulatory capture theory acknowledges some self-interest, which is a part of the story but not all of it. The Private interest theory acknowledges self-interest of all parties involved and therefore, all the theories were build on each

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