Financial Regulation in Australia and Singapore

Discuss About The Globalisation Financial Reporting Standard.

As discussed by Bryce, Ali, & Mather, (2015), “Financial regulation” is identified as that form of rule which subjects financial organizations to consider “certain requirements”, guideline and restrictions   aiming to maintain the integrity within the financial system. These regulations may be both “government or non-government organization”. In addition to this, financial regulation has influenced the structure of banking sectors by increasing the variety in the availability of the financial products. The report has undertaken the literature review of Australia and Singapore’s regulatory requirement for the financial reporting. The discussions on the individual regulatory environment has commented on the various types of the perceived problems of the regulatory environment of the individual countries. It has also stated about the different aspects of the how the environment works and who are the major decision makers. Some of the other discussions have been related to the discussion associated to the what legislation is required. The report has also discussed about the country’s progress towards the adoption of IFRS. The second part of the report has analysed each of the selected environment and assessed the financial regulatory environment through the lens of Regulatory Capture Theory. To explain these topics, the report has highlighted on the “what regulatory capture theory is and why is might be useful”. It has also discussed about the characteristics which may indicate the that a regulatory environment might be “captured” (Chen, Ng, & Tsang, 2015).

The implementation of IFRS in Australia was depicted with the motive to improve the “standards, comparability, accuracy and transparency of financial statements for a company within a particular period”. However, the adoption of IFRS in Australia is depicted with the issues such as lack of training, “problem for the entities, auditors, regulators as well as the interesting parties who are familiar with previous accounting standards”. This is also considered as a major challenge for adhering to the necessities of gaining addition skills for application and evaluation of “IFRS”. Some of the significant issues has been also seen with the IFRS compliance to the legal and political environment and this has been a major challenge. In various cases the presentation of information and understanding of the technical knowledge has been a major challenge to the adoption (Hla & Md Isa, 2015).                  

The “Singapore Financial Reporting Standards” is seen with challenges in implementing “FRS 115”. Many companies are yet to adopt the new revenue structure and facing the challenges pertaining to the initiating new revenue standard. This is considered with in accordance to the EY “poll of 53 finance executives in Singapore, conducted in late November 2016”. More than 62% of the respondents of the poll have designated that they have not started identifying and assessing the key impact of FRS 115. Moreover, some of the new emerging companies are seen to be facing issues in adopting the other regulations prescribed by other SFRS standards. In some of the other cases the lack of finance experts is seen to be posing major challenge to the companies (Sugiyama & Islam, 2016).

Adoption of IFRS in Australia and Singapore

AASB is recognised as an agency of the “Australian Government”. The “AASB standards are known as Australian Accounting Standards and include Australian equivalents to International Financial Reporting Standards (IFRSs)”. The first adoption of the IFRS as “Australian Accounting Standards, the AASB made some modifications to IFRSs, including removing some options and adding some disclosures” (Cascino & Gassen, 2015). It has been observed that in 2007, AASB made some modifications in the “Australian Accounting Standards” so that the various types of the requirements were identical to the “IFRSs as issued by the IASB for for-profit entities” (Meier & Mitscherlich, 2015). Some of the other disclosures is compliant to the extra exposures which were retained and “non-IFRS compliant requirements” were seen to be applied for the “not-for-profit and public-sector entities”. The new differential reporting regime published by “Australian Accounting Standards Board (AASB) in July 2010” were elected to adopt the “Reduced Disclosure Requirements’ (RDR)”. The requirements as per the RDR entitles to follow the acknowledgement and measurement requirements for all “Australian Accounting Standards (which are equivalent to IFRSs), but with reduced disclosure requirements” (Joshi, Yapa, & Kraal, 2016).

In Singapore the Accounting Standards council (ASC) has the statutory authority for issuing SFRS adoption. The group of entities for reporting the entity under the common control is considered under common control which is based under a single customer. The main assessment of the financial regulatory decisions is seen with the government agencies which are included under similar bodies of single customer. Some of the important legislations for the SFRS implementation has been recognised with the “International Financial Reporting Standards (IFRS) that are issued by the International Accounting Standards Board (IASB)”. It has been depicted that the financial statements of the following entities are able to provide the adequate information about the performance and the cash flows along with a variety of users in making the important economic decisions. The various type of the users of the financial statement ranges from the “shareholders, creditors, employees and the public” (Christensen et al., 2015).   

“Australia adopted IFRSs effective from 1 January 2005”, in “2015 the AASB” commenced the examination for the implementation to assess the ongoing relevance of IFRS to the “Australian for-profit and not-for-profit (NFP)” reporting entities. In most of the sectors the transition process is seen to be smooth, the IFRS is considered as an appropriate basis for the NFP standards which is developed by the AASB (Ji & Lu, 2014). However, there has been several scopes for the modifications which are needed for the quality and cost-efficiency of reporting. The adoption of IFRS in all the sectors has allowed the users and preparers to move between the sectors and countries with transferable skills and knowledge. The universally active entities are seen to be based on the adopting the IFRSs across all the sectors which has enabled the users and preparers to fully comply with the new standards especially with regards to the “disclosure requirements” (Ramanna & Sletten, 2014).

Challenges with IFRS implementation in Australia and Singapore

The separate or the individual financial statements of the “Full Convergence with International Financial Reporting Standards (IFRS)” in Singapore. On 29th December 2017, ASC was seen with “Standards (International) (SFRS(I)s), Singapore’s equivalent of the International Financial Reporting Standards (IFRSs)”.  “Singapore incorporated companies” have issued the procedure of dispensing the equity or the debt instruments for trading the public market in Singapore which are seen to be required to apply for the “SFRS(I)s for annual periods beginning on or after 1 January 2018”. The recognition of the importance for the ASC has affirmed that Singapore financial reporting standard registered BTs: IFRS. The authorised “CIS statement” of the suggested accounting practice 7 is consistent with the major funding jurisdictions like USA and UK (Kabir & Rahman, 2016). The IFRS convergence, ISCA has depicted audit partners from different public accounting firms. The converging exercise is required to highlight the main considerations for the entities converging with the SG-IFRS. “Singapore Financial Reporting Standards” (“SFRS”)”, is obligatory to “apply all the specific transition requirements” in “IFRS 1 First-time Adoption of IFRS” (Morris, Gray, Pickering, & Aisbitt, 2014).

The supervisory capture is a theory is related to the “George Stigler, a Nobel laureate economist”. This process is regulated by the agencies which eventually come to be dominated with the industries requiring regulation. The regulatory capture takes places when a controlling agency is formed to act in the interest of the public (Tan, Chatterjee, & Bolt, 2014). This eventually acts in the means of providing benefits to the interest of the public. This has been further seen to be providing benefit to the industry it is supposed to be regulating, rather than the public. The “regulatory capture theory has been identified as a government failure which occurs” when the regulatory agency is created to act with the public interest instead of the advances from the political or the commercial concerns of special interests (Cheung & Lau, 2016).

The public interest agencies are considered to be controlled by the industries which were charged with the captured agencies. The regulatory capture has been further seen to be considered with the various types of the agencies which are related to situations where the gamekeeper turns poacher. In other word the interest agency sets out to protect the ignored in favour of the regulatory interest. The “regulatory capture theory” is associated as the core focus on the branch of public choice, which is often referred as the economics of regulation; and economics in the speciality are critical for the conceptualization of the government “regulatory intervention” (Chen et al., 2015). The theory of regulatory capture has been considered with very nature of the risk to which the agency is exposed by the very nature. The various types of the suggestions as per the regulatory environment has been further able to related the different type the theories and suggest that these theories are protected from the outside effect as much as possible. The recent interpretations of the has been able to suggest on the mature democracies considered with the high levels of the transparency and the media which is exposed to the “higher levels” of corruptions (Cai, Rahman, & Courtenay, 2014).

Financial Regulatory Environment through the lens of Regulatory Capture Theory

The analysis of the characteristics indicated that a regulatory environment might be “captured” with the given literature which can be seen with identifying the various types of the regulatory environment for the individual countries. It is also depicted that in several cases IFRS in Australia is conducive with implementing the cost savings in preparing financial reports. There have been several instances where the organizations have been able to benefit from the implementation of the complying with the new standards and the exposure draft. These changes have been tracked after the companies are seen to be controlled by the industries which were charged with the captured agencies. In several occasions the difficulties in the implementation of the NFP standards developed by the AASB has been conducive in the IFRS implementation.

The regulatory environment is identified to be also complying with the medium-sized environment which is seen to be considered with the “new standards especially” as per the expose requirement. The literature review of the Singapore has been further able to comment on the means of providing benefits to the interest of the public. The Singapore government is depicted to make several types of the changes in the government policy. The addressing of the issues by the Singapore government in terms of the regulatory capture is considered with the applications of the various types of the statutory changes made in the financial regulatory environment (Cai, Rahman, & Courtenay, 2014).

Conclusion

The report has been able to state that perceived problems of each system has been identified with the issues such as lack of training, “problem for the entities, auditors, regulators as well as the interesting parties who are familiar with previous accounting standards”. This is also considered as a major challenge for adhering to the “requirements of gaining addition skills for application and evaluation of IFRS”. The problems of the SFRS is identified with challenges pertaining to the initiating new revenue standard. The significant findings on the working of regulatory environment have shown the first adoption of the IFRS as “Australian Accounting Standards, the AASB made some modifications to IFRSs, including removing some options and adding some disclosures”. In addition to this, in Singapore the Accounting Standards council (ASC) has the statutory authority for issuing SFRS adoption. The country’s advancement towards the adoption of “IFRS” has been identified with Australia’s adoption of IFRS being effective from 1 January 2005. In most of the sectors the transition process has been seen to be smooth, the IFRS is considered as suitable for the “NFP standards” which is developed by the AASB. The Singapore’s progress towards the adoption of IFRS is considered with the “Full Convergence with International Financial Reporting Standards (IFRS)” in Singapore. On 29th December 2017, ASC was seen with “Standards (International) (SFRS(I)s), Singapore’s equivalent of the International Financial Reporting Standards (IFRSs)”.  It is also seen that both the country has complied with regulatory capture theory.

References

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