UK Financial Regulatory Framework

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Introduction The financial regulatory framework in UK is called GAAP or General Accounting Accepted Practice and is the body responsible for the rules and regulation that companies within the UK must follow when reporting financial information. There are three main sources of rules governing accounting regulation in UK namely: the companies’ act 2006, (which incorporated EU accounting directives), UK accounting standards (FRSs and SSAPs) and London Exchange Company listing (International Accounting Standards). Recently, the FRC (Financial Reporting Council) issued a new directive which will require (except the small companies, which can use FRRSE) to report in accordance with FRSI or IFRS by the end of 2015. There has been much debate over the advantages and disadvantages of the regulation of financial reporting. The central argument put forward by proponents of regulation of financial reporting is that a lack of regulation of the market results in severe market failure and regulation mitigates the chance of such failure. On the other hand, proponents of the free-market approach argue that the private incentives for self-regulation and production of credible financial reports are such that regulation is unnecessary and often worsens market collapses- the opposite of its intended purpose. This paper will argue that whilst regulation is necessary to mitigate market failure and serve the public interest, it is important to consider that regulation has in some cases caused financial crises. The global economic crisis has “ignited worldwide debate on the issues of systemic risk and the role played by financial regulation in creating and exacerbating the crisis” (Bushman and Landsman 2010: 259). The first part of the paper introduces a... ... middle of paper ... ...ulating corporate reporting. a critical review of arguments. ‘Accounting and Business Research’, Vol. 40. , pp. 275-77. 3. Menassa, E, 2010. the case for accounting regulation. a theoretical approach, 1, 107. 4. Ward, C. D, 2013. Financial Accounting and Reporting. An International Approach, 1, 2 a 5. 2013. . [ONLINE] Available at: http://www.accaglobal.co.uk/content/dam/acca/global/PDF-technical/financial-reporting/tech-tp-fofr3.pdf. [Accessed 07 December 2013]. 6 .Financial reporting J. Haslam and D. Chow AC3091, 2790091 http://www.londoninternational.ac.uk/sites/default/files/programme_resources/lse/lse_pdfubjet_guides/ac3091_ch1-3.pdf/s. 7 . 2013. . [ONLINE] Available at: http://financial.kaplan.co.uk/Documents/ICAEW/Financial_Accounting_Chapter_1.pdf. [Accessed 07 December 2013]. 8 KAPLAN, Kaplan, 2012. ACCA PAPER 7. 2nd ed. uk: KAPLAN PUBLISHING. PAGE 36

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