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Chapter 2 Companies and Corporate Regulation

Chapter 2 Companies and Corporate Regulation. Lecture Topics. Characteristics of a company Types of companies and other regulated entities Historical evolution of the company and corporate regulation The Corporations Act and regulation of financial reporting. Lecture Topics.

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Chapter 2 Companies and Corporate Regulation

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  1. Chapter 2 Companies and Corporate Regulation

  2. Lecture Topics • Characteristics of a company • Types of companies and other regulated entities • Historical evolution of the company and corporate regulation • The Corporations Act and regulation of financial reporting

  3. Lecture Topics • Evolution of financial reporting requirements • Other sources of authority in company accounting • The thrust of legislative reforms

  4. Lecture References • Text - Chapter 2 • Corporations Act 2001

  5. Key Concepts • Separate legal identity • Shares • Limited liability company • No liability company • Unlimited liability • Public and proprietary companies

  6. Characteristics of a Company • Legal personality • Limited liability • Ownership by shares • Perpetual succession • Ability to raise capital • Professional management

  7. Types of Companies • Size of ownership • public company • proprietary company • small proprietary company

  8. Types of Companies • Mode of participation • share company • guarantee company • Extent of liability • limited liability • no liability • unlimited liability

  9. Limited liability Unlimited liability shares No liability guarantee Limited liability small Limited liability shares large Unlimited liability Company Structures: Possibilities Public Proprietary

  10. Types of Companies • Special types • investment • banking • life insurance • foreign

  11. Other Forms of Regulated Entities • Managed investment schemes • Corporations formed by an Act of Parliament • Disclosing entities • enhanced disclosure securities • continuous disclosure requirements

  12. Evolution of Companies and Corporate Regulation • Uncommon until late 19th century • Based on British system • Mainly restricted to govt./quasi-govt. and religious organisations • Early concern over fraud and manipulation • Limited liability -> UK 1855

  13. Evolution of Corporate Regulation • Australia • initially administered by states • no uniformity until 1960’s • Uniform Companies Act • National Cooperative Scheme (1981) • National Companies and Securities Commission • Corporations Act 1989 and the Corporations Law

  14. Evolution of Corporate Regulation • Present company law scheme • Corporations Act 2001 • effective 16 July 2001 • federal legislation • Corporations Regulations • Related legislation • Australian Securities and investment Commission (ASIC)

  15. Corporations Act and Financial Reporting • Recording of financial data • Compulsory reports • AASB standards • carry ‘force of law’ • nature and role of AASB • entities regulated by AASBs

  16. Corporations Act and Financial Reporting • AASB standards • mandatory standards and a ‘true and fair view’ • accounting standards with the force of law • Framework for development of AASB • role of FRC and the AASB • Development of a conceptual framework • Due process

  17. Corporations Act and Financial Reporting • Enforcement of reporting requirements • Enforcement of Accounting Standards • embodied in the Law • non-compliance a breach • auditors must advise ASIC • ASIC can enforce • Enforcement of other financial reporting-related requirements

  18. Other Authority for Financial Reporting • Urgent Issues Group abstracts • established within AARF in 1994 • numerous abstracts • mandatory compliance • Statements of Accounting Concepts • SACs 1-4 • non mandatory

  19. Other Authority for Financial Reporting • Accounting Guidance Releases • advisory only • clarify accounting standards • Accounting Bulletins • issued by AARF • provide guidance

  20. Other Authority for Financial Reporting • International Accounting Standards • IASC and IOSCO • International harmonisation • AASB and G4 + 1 • Australian Stock Exchange (ASX) • ASIC practice notes, policy statements and class orders

  21. Accounting Bulletins IAS Standards AASB Standards Accounting Interpretations Standing Interpretation Committee Urgent Issues Group SICs UIG Abstracts 15 Day Disallowance International Accounting Standards Committee Australian Accounting Standards Board

  22. Evolution of Australian Financial Reporting • The role of the accounting profession • regulation of financial reporting practice • non-mandatory statements of best practice • mandatory professional technical standards

  23. Evolution of Australian Financial Reporting • The role of legislation • the ASRB • AAS’s vs AARB accounting standards • the Corporations law and the AASB • References to standards

  24. Thrust of Legislative Reforms • Streamlining reporting requirements • Specification in Accounting Standards rather than the law • Simplification of corporate administration • Differential reporting requirements • Reorganisation of legal provisions

  25. Thrust of Legislative Reform • Changes to corporate governance • 1st Corporations Law Simplification Act 1995 • Company Law Review Act 1998 • Corporations Act 2001

  26. Where to get more information • Other courses • List books, articles, electronic sources

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