Accounting Regulation Essay

Over the years there has been a continual debate over the necessity of accounting regulations. Some people have many reasons favouring accounting regulations such as the belief that accounting conventions are needed in order to allocate and control the economic outcomes of resource allocation and information stipulation in the market. However, others have arguments against the use of accounting regulations, such as regulation leading to oversupply of information as users who don’t bare any cost tend to overstate their needs.
Accounting regulation arose shortly after the 1920s, where researchers wanted to classify commonly accepted accounting regulations. Examples of these include the entity assumption and the matching principle. It was in 1946 that the institute of charted accountants in Australia released five recommendations on accounting principles. Then in 1956 following the great depression, numerous recommendations were issued by the Australian society of accountants. Accounting regulations in financial reporting are seen as "the imposition of constraints upon the preparation, content and form of external financial reports by bodies (governments, regulatory agencies established by governments, trade and other associations in the private sector, loose industrial groups which pursue collusive activities) other than the preparers of the reports, on the organisations and individuals for which the reports are prepared" (Taylor and Turley, 1986: 1).
There are many benefits associated with the implementation of regulations within the market. According to some, accounting regulation is necessary to ensure market efficiency. Market efficiency allows accounting information to be available at just costs. However, in reality markets are imperfect due to factors such as information asymmetry. Without these regulations which permit efficiency, it is believed that markets may fall into disorder. Regulation allows for comparison of reports and accounting information,