The Predictions And Effects Of Financial Accounting

Introduction In the main analysis, this essay will describe the predictions and effects of financial accounting reports to discuss the statement based on the previous answer. In the conclusion, the essay will explain how the question helps to understand the importance of learning about accounting in its context. Main Analysis Predictions of Financial Reporting There are four preconditions of financial accounting reporting. Firstly, there are debates that upheld and against the regulation of financial accounting. The supporters of the ‘free-market’ technique dispute that there are proprietary economic incentives for organizations to report accounting information proactively, and forcing accounting regulation is costly inefficient (Deegan Unerman, 2011). By comparison, the supporters of the ‘pro-regulation’ viewpoint dispute that regulation is requisite as financial information is a ‘public good’, and users of accounting information are ‘free riders’, so organizations will report a lower quantity of information than socially optimal (Deegan Unerman, 2011). Secondly, various stakeholders have various viewpoints of the evolution of regulation. According to public interest theory, regulation is introduced to safeguard the community and regulators attempt to maximize public welfare (Deegan Unerman, 2011). According to capture theory, regulated organizations will obtain command of the regulating procedure (Deegan Unerman, 2011). According to private interest theory,Show MoreRelatedFinancial Accounting Theory the Reporting Environment1578 Words   |  7 PagesWeek 2: Topic 1: Financial Accounting Theory the Reporting Environment GHTHH Chapter 2 5. 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