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 Evolution of financial reporting requirements Other sources of authority in company accounting The thrust of legislative reforms

Lecture References Text - Chapter 2 Corporations Act 2001

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

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

Types of Companies Size of ownership – public company – proprietary company – small proprietary company

Types of Companies Mode of participation – share company – guarantee company Extent of liability – limited liability – no liability – unlimited liability

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

Types of Companies Special types – investment – banking – life insurance – foreign

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

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

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

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)

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

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

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

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

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

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

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

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

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

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

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

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