Tightening of Accounting Regulations

Tightening of Accounting Regulations Students Name Institutional Affiliation There has been a lot of changes in the world of business which have resulted in economic growth or decline in different parts of the world. The main difference in the manner in which the economy grows is the issue of accounting regulations. Over the years, the use of loopholes in accounting fraud has emerged, including many well-known big companies. This has resulted in a substantial economic decline in the affected sectors. So, the general trend has been to strengthen regulation in order to ensure that businesses follow certain rules directed towards the improvement of their performance and the economy. However, there has always been another opinion that too much regulation will lead to the loss of vitality in the business world because the organizations would be required to follow a particular trend which might not be favorable to all businesses. Besides, there is a need to keep on regulating the accounting regulations to ensure that businesses do not misuse the existing laws to take advantage of the stakeholders. By clarifying the methods and influences of regulation, people in business can have a better understanding of changes in accounting standards and areas that are vulnerable to fraud. This is valuable for business professionals, especially those in the accounting profession. Therefore, there is a need for businesses to adapt to each of the business regulations because they are made to ensure that their operations are directed towards the success of the organization and the maximization of the shareholder's wealth. Every organization is required to follow such standards because they will be keen to ensure that they can account for each of their activities in the financial reports. The international accounting standards display uniformity in the financial system regarding their enforcement and interpretation (Barth, Landsman & Lang, 2008). The update made on the international accounting standards has a positive impact on increasing the accountability of organizations. Given the fact that businesses operate in different environments, then there is a need to update such rules to ensure that they are in favor of every organization. It is the wish of every shareholder to get accountability of the organization's activities, and this can only be made possible through the application of the international accounting standards. In addition, tightening the regulations on accounting will not hurt the business world because the rules will ensure that business provides clear explanations for their financial reports. For instance, the Maribond effect is an accounting concept whereby the value of an acquired brand remained unchanged in the balance sheet regardless of whether it has been able to perform or not (Sinclair & Keller, 2017). In the event whereby the value of the brand has declined, then the organization should be in a position to explain to the financial markets the reasons behind the decline. As well, in the event of a gain, an explanation should also be provided. Hence, in the event whereby such a regulation is not provided for, the businesses could end up making losses without having to give a reasonable explanation to the shareholders. The changing accounting standards need to accommodate for the value of the acquired brand to ensure that companies can record and account for the brand's decline or gain. In most cases, the brand's value is reported in the Management Discussion and Analysis. Therefore, accounting regulatory bodies need to explain the benefit of tightening the rules to prevent businesses from taking advantage of their shareholders. As well, in the case of a merger or acquisition, the issue of the Maribond effect would enable the shareholder to track the benefits or gains of the merger or acquisition. In addition, tightening of the accounting rules would result in global economic growth. The regulations would end up favoring most of the organizations hence making it easy for them to contribute to the speculated economic growth. For instance, there was different market's reaction towards the discussions of the period 1988 to 2015 following the revenue recognition standards that were issued by FASB and IASB. The GAAP firms displayed a negative reaction while the IFRS firms showed a posit...