The Accounting Standards Committee (ASC) was criticised heavily prior to its replacement by the Accounting Standards Board (ASB). The principal intention of the ASC was to create greater uniformity in the preparation of financial reports in order that there should be more comparability between the results of different companies. Many commentators felt that the ASC failed to achieve their intentions and criticised the role of the ASC because of the following reasons:

(i) A failure to develop an agreed conceptual framework and to specify user needs.

(ii) The composition of the ASC. The ASC had little representation from independent user groups, with the majority of its members coming from the accounting profession.

(uli) The inadequate enforcement of standards. Some writers criticised the ASC for limiting the enforcement of standards to the qualification of the audit report.

(iv) The ASC was too open to pressure from various interested groups who had a direct interest in the work of the committee. This led to political interference in the standard setting process.

(v) A failure to respond quickly to emerging issues.

When the Dearing Committee’s recommendations on a whole new structure to replace the ASC were adopted, it was hoped that the new structures would lead to the elimination of the above criticisms. However, there are those who feel that there is no need for a standard setting body, and that there is no need for accounting standards. In contrast, others feel that standards should be set by the government and be incorporated in the law.

Required

(a) Explain why there is a need for regulation of financial information in the form of accounting standards.

(b) Discuss to what extent you feel that the criticisms of the Accounting Standards Committee set out above apply also to the new structure for regulating accounting standards.

(c) Discuss whether you feel that FRS 1 ‘Cash-flow Statements’ has fulfilled the objective of creating greater uniformity in the preparation of cash-flow statements.