Accounting Regulation Financial Data

Question: Discuss about the Accounting Regulationfor Financial Data. Answer: Free market perspective of accounting information: Definition: The free market perspective for the information of accounting is an ordinary asset for the economy. The demand for accounting information by various users in combination with the contribution by various organizations in the annual report form is expected to target a procedure for exchange normally ant it results into effective segregation in the industry. The availability of financial data with the organization and its use by the user are sufficient to influence the market. Application of Free market Approach: As information on accounting is the publics right, after releasing the annual report, public can use that free of cost and can provide to others for no cost. The investors can get the details about company without any difficulty and after going through the information, they can decide about their investment. The debtors and creditors can actually know the position of the company without much problem and can assess the financial viability of the company (Christensen and Nikolaev 2013). Advantages: If the managers want to increase the value of their shares, they can voluntarily enter into an agreement with the lenders and shareholders to make maximum information available to them. Free market approach helps to gain higher level of assurance from the lenders, investors and shareholders. Disadvantages: If the information supplied by an organization about accounting is not adequate, it is assumed that the management of the organization are not efficient and they are carrying out the business for self benefit Less availability of information will lead to more outflow of capital cost The organization may have to expense on reputation, if they are not able to reveal the bad news in a proper time (Sorrentino, Cossu and Smarra 2015). References: Christensen, H.B. and Nikolaev, V.V., 2013. Does fair value accounting for non-financial assets pass the market test?.Review of Accounting Studies,18(3), pp.734-775. Sorrentino, M., Cossu, F. and Smarra, M., 2015. The Production of Accounting Information Between Regulatory and Free Market Approach: An (Eternally) Open Issue.Journal of Modern Accounting and Auditing,11(1), pp.1-9.