US Institutions in the Global Financial Crisis - Free Essay Example

Sample details Pages: 10 Words: 3069 Downloads: 2 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? This essay discusses about the global financial crisis that struck United States. It will look at what measures did US government took to protect these financial institutions. Then it will analyze shareholder and stakeholder models of corporate social responsibility, then relate this theory with the situation. Next it will discuss whether US governments action could be justified from either or both of these models and it will talk about the short and long term consequences of government intervention. And in conclusion it will discuss whether actions taken by US government is best for society or not. The global financial crisis all started back in 1977, when Community Reinvestment Act was passed by 95th US Congress and signed into law by president Jimmy Carter (Busy Times, 2008). It was designed to encourage commercial banks to meet the needs of borrowers in all segments of the communities, including low-income neighborhoods (Busy Times, 2008) Then initially led by very low interest rate regime during Alan Greenspans era, 2000 2006, it allows homebuyers to take up mortgage with low interest as it allow financial institution to generate income growth, and one of it is subprime lending, practice of making loans to borrower who do not qualify for market interest rates of traditional housing mortgages cause it had problems with their credit history or the credibility to prove they had enough income to support the loan payment (Busy Times, 2008). Through this, borrowers with bad credit history were able to get a mortgage loan, even borrowers with no income, job and ability to repay; consequently it decreases the lending standards, as shown below (Busy Times, 2008). With this situation, 2nd tier institutions were lending money to homeowners, and then securitize the assets and sell it to major US financial institutions including many investment banks, and those investment banks sold it to investors (Busy Times, 2008). This cycle allow bank to earn extra income for the sale, consequently this let to a sharp rise in household debt, graph 1 (Busy Times, 2008). At first it was not a problem cause house price kept growing for years, graph 2, thus borrower could not repay the loan, bank could always foreclose mortgage and sell the collateral (the house) at a higher price (Busy Times, 2008). - Graph 1 Household Debts (APRA, 2008) Graph 2 House Price (APRA, 2008) - But as housing affordability fell, housing prices rose more than disposable income, this meant people were not up to meet the test of subprime, therefore banks income would fall due to lower volume of loans, but there were unrealistic expectations of asset growth in housing (Busy Times, 2008). Housing prices starts to fall, and more and more people defaulted, so now there are more houses in the market than buyers, which causes housing prices to fall even further (Busy Times, 2008), which mark the start of the global financial crisis. Global Financial Crisis initially started in United States, and United States being a super power country, brings a huge impact to the rest of the financial world. Trying to fix this, United States government responded by providing some solutions, one of it is Troubled Asset Relief Program (TARP). The Troubled Asset Relief Program (TARP) set up under the Emergency Economic Stabilization Act, 2008 (Ghosh, S. Mohamed, S., 2010), authorized the US Treasury Secretary a total of $700 billion to establish TARP (Ghosh, S. Mohamed, S., 2010). TARP provides wide raging powers to US Treasury secretary to purchase, manage and sell troubled assets held by financial institutions, and to sell or enter into securities, loans, repurchase transaction or other financial transactions with respect to any troubled asset purchased under the Act (Ghosh, S. Mohamed, S., 2010),. Under TARP, bank, thrifts, credit unions, broker dealers and insurance companies are deemed as financial institutions, but central bank or i nstitution that is owned by foreign government is not deemed as financial institution (Ghosh, S. Mohamed, S., 2010),. And as for troubled assets, it include residential, commercial mortgages, securities, obligations and other instruments based on related to such mortgages, in each case originated or issued on or prior to March 14, 2008 as defined by the Act (Ghosh, S. Mohamed, S., 2010). TARP was originally intended to be a lending programme and one that would increase liquidity by encouraging the flow of credit between the banks and from banks to customers (US treasury, 2008a). The idea was to enable federal government to obtain up to US$700 billion of illiquid mortgage backed securities (MBS) and assets backed securities (ABS) and thereby lubricate secondary mortgage markets (US Treasury, 2008a). TARP was also design to minimize losses of financial institutions owing the toxic assets and thereby, inducing credit growth (Ghosh, S. Mohamed, S., 2010), Economic Stabilization Ac t, 2008, states the objective of TARP, is to provide stability to US financial system, preventing disruption in economy at large and financial system and protect US taxpayer (Ghosh, S. Mohamed, S., 2010), The Act also offers setting up of Troubled Assets Insurance Financing Fund (TAIFF), the purpose is providing financial institutions the chance to purchase insurance from government to guarantee their troubled assets (Ghosh, S. Mohamed, S., 2010). But conversely, in about five weeks, Treasury was suppose to buy those toxic assets off the balance sheets of the bank and financial institutions, but instead the Treasury bought non voting preferred stock from banks and institutions through investing TARP funds in them (US Treasury, 2008d). Cause of that, TARP has failed to ensure liquidity, repair confidence, build trusts in the banking system, redress the issues of encouraging lending to homeowners, counter massive foreclosures and contraction in housing market and stop house prices from spiraling downwards (Congress Oversight Panel Report, 2009c; Barr, 2008; McIntyre, 2009). The first tranche of $250 billion TARP money was used to pump in $167 billion in 87 banks in exchange for preferred stock and warrants (US Treasury, 2008e). Next it went to AIG, about $40 billion (US Treasury, 2008f), then to Citibank, about $45 billion in exchange for preferred stocks and warrants (Ericson et al., 2009). As in Wall Street Journal, it discuss that U.S. government made a bail out as of American International Group Inc. (AIG) as it injects $85 billion to the firm, this show the intensity of its concerns about the danger of AIG collapsing to the financial system (Kartnitschnig, M. et a, 2008). The decision was difficult one, as federal government had been strongly resisting overtures from AIG for an emergency loan or intervention that would prevent the insurer from falling into bankruptcy (Kartnitschnig, M. et a, 2008). Cause just a week before, government decided not to intervene to help Lehman Brothers Holdings Inc, as a result it went bankruptcy, but this time government decided AIG was truly too big to fail (Kartnitschnig, M. et a, 2008). U.S. government also took over mortgage lending giants Fannie Mae and Freddie Mac as the teetered near collapse, another Wall Street giants, Merrill Lynch Co agreed to self it self to the Bank of America Corp (Kartnitschnig, M. et a, 2008). In the end, U.S. negotiators negotiate a proposal that could help both sides, which the Federal will lend $85 billion to AIG and in return U.S. government would be entitled to 79.9% equity stakes in form of warrants (equity participation notes) and the two year loan will have Libor (London interbank offered rate) + 8.5% interest rate (Kartnitschnig, M. et a, 2008). Shareholder theory suggest that business are just arrangements by which shareholders advance capital to managers to be utilized for specified ends and for receive an ownership interest in the venture (Beauchamp et al, 2009,p.66). In this perspective, managers perform as agent for shareholders, though bound by agency relationship to do so exclusively for the purposes of their shareholder principle (Beauchamp et al, 2009, p.66). This fiduciary relationship implies that managers does not have the obligation to expand business resources in ways that are not authorized by shareholders, despite presence of societal benefits from doing so (Beauchamp et al, 2009, p.66). However, both shareholders and managers are free to use their private funds for charitable or socially beneficial project, but when performing as officers of the business, managers have the duty not to divert business resources away from the intention of the shareholders, and managers, him or herself are obligated to follow legal directions of the shareholders and are required to maximize shareholder financial returns (Beauchamp et al, 2009, p.66). Nevertheless, it does not state that managers to ignore ethical constrai nts in pursuit of profits, rather it make certain managers are compelled to pursue profits by all legal and non deceptive means (Beauchamp et al, 2009,p.66) Adam Smiths invisible hand argument state the market is efficient if everyone is allowed to pursue Conversely, shareholder theory has been looked from two different perspectives, which are consequentialist and deontological. Consequentialist, argue that businesses or businesspersons does not have any social responsibilities, other than to legally and honestly maximize profits of the firms (Beauchamp et al, 2009,p.67). Deontological side; argue that based on observation, shareholders transfer their funds to business managers on the provision, those funds are used on their wishes (Beauchamp et al, 2009,p.67). If managers accepted those funds on that specific circumstance, they are not allowed to spend it to accomplish social goals, other than authorized by shareholders, and if they did without authorization, they would be viola ting their agreement and spending other peoples money without their concern (Beauchamp et al, 2009,p.67). Stakeholder theory, a theory of organizational management and business ethics that addresses morals and values in managing an organization (Philip et al, 2003), as in the definition above, the theory itself is divided into two parts, organizational management and business ethics. The organizational management side is known as Empirical theory of management and the business ethics as Normative theory of business ethics. As in this essay, it will focus on the Normative theory of business ethics. Empirical theory of management just discuss about effective managements are required for balancing consideration of and attention to the legitimate interest of all stakeholders, anyone who has stake on firm (Beauchamp et al, 2009,p.69). Normative theory in the other hand, argue, regardless whether stakeholder management leads to improved financial performance, managers should manage the business for the benefit of all stakeholders (Beauchamp et al, 2009,p.69). It views firms not as a mechanism for increasing stockholders returns, rather as a vehicle managing stakeholder interests and sees management as having a fiduciary relationship not just to stockholders, but all stakeholders (Beauchamp et al, 2009,p.69). As a result, it guides management to give equal interest to all stakeholder (Beauchamp et al, 2009,p.70), therefore in this normative form, stakeholder theory imply business have true social responsibilities (Beauchamp et al, 2009,p.70) But normative theory and empirical theory agree on one thing, the best way to enhance the stakeholders return on their investment is to pay attention to the legitimate interests of all stakeholders (Beauchamp et al, 2009,p.69). Stakeholder theory holds that managements fundamental obligation is not to maximize the firms financial success, but to ensure its survival by balancing the conflicting claims of multiple stake holders (Beauchamp et al, 2009,p.69). Meeting this obligation, act accordance to two of stakeholder management must be done, which are, principal of corporate legitimacy and stakeholder fiduciary duty. Principle of corporate legitimacy, the corporation should be managed for the benefit of its stakeholders: its customers, suppliers, owners, employees, and the local communities(Beauchamp et al, 2009,p.70). The rights of these groups must be ensured and, further, the group must participate, in some sense, in decisions that substantially affect their welfare (Beauchamp et al, 2009,p.70) Stakeholder fiduciary duty, management bears a fiduciary relationship to stakeholders and to the corporation as an abstract entity, which must act in the interests of the stakeholders as their agent, and it must act in the interests of the corporation to ensure the survival of the firm, safeguarding the long term stakes of each group(Beauchamp et al, 2009,p.70). As to shareholder theory, the act ions of the corporations comply with this theory, as corporations look for sources of income through securitization process. The cycle begin with institutions lending money to homeowner, then securitizing the assets and selling it to major U.S. financial institutions including many investment banks, and finally those investment sell it to investors (Beauchamp et al, 2009, p.66). This allow bank to earn extra income for sale, and generate a massive income (Beauchamp et al, 2009, p.66). By doing so, it comply with the shareholder theory, as it argue that businesses or businesspersons does not have any social responsibilities, other than to legally and honestly maximize profits of the firms, but this theory is best for short term (Beauchamp et al, 2009, p.67). Since the theory emphasize on best to maximize profit, banks lower their standards of lending, not thinking thoroughly the consequences, banks were able to lend more and to securitize more, which can generate more income (Beaucha mp et al, 2009, p.66). At first it was not a problem at all, as if borrower could not repay loan, bank could always foreclose mortgage and sell collateral (house) at a higher price, cause house price kept growing for years (Beauchamp et al, 2009, p.67). But as years past by, housing affordability fell, since supply is less then demand, to be able to equalize it, price need to be put up (Beauchamp et al, 2009, p.66). As housing price rose more than disposable income, more people were not up to meet the test of subprime, for that reason banks income would fall due to lower volume of loans (Beauchamp et al, 2009, p.67). But due to unrealistic expectations of asset growth in housing, housing prices start to fall and more and more people defaulted, so now there is more supply than demand (Beauchamp et al, 2009, p.67). To equalize this, price needs to be put down, soon as housing prices fall down, it marked the start of the global financial crisis. Fiduciary duty of a shareholder theor y is to maximize their income for their shareholder, and neglecting other factors (Beauchamp et al, 2009, p.67). But in stakeholder theory, the fiduciary duty is to act in the interest of the stakeholder and must act in the interest of the corporations to ensure survival of the firm, safeguarding long-term stakes of each group and it holds that managements fundamental obligation is not to maximize the firms financial success, but to ensure its survival by balancing the conflicting claims of multiple stakeholders (Beauchamp et al, 2009, p.67). It also view firms not as mechanism for increasing stockholders returns, rather as a vehicle managing stakeholder interests and sees management as having a fiduciary relationship not just to stockholders, but all stakeholders (Beauchamp et al, 2009, p.66). As a result, it guides management to give equal interest to all stakeholder, therefore in this normative form, stakeholder theory imply business have true social responsibilities (Beauchamp e t al, 2009, p.67). It also suggested, corporation should be managed for the benefit of its stakeholders: its customers, suppliers, owners, employees, and the local communities(Beauchamp et al, 2009,p.70). The rights of these groups must be ensured and, further, the group must participate, in some sense, in decisions that substantially affect their welfare (Beauchamp et al, 2009,p.69). As what the U.S. government does, it complies with this theory. U.S. government intervenes with this situation, to help stabilize the financial system, cause if not, the financial crisis could have a worsen affect and everyone would suffer more. The U.S. government intervenes through TARP (Troubled Asset Relief Program). Those funds in TARP were used to pump in $167 billion in 87 banks in exchange for preferred stock and warrants (US Treasury, 2008e). Then to AIG, $40 billion (US Treasury 2008,f) then Citibank, $45 billion in exchange for preferred stocks and warrants (Ericson et al., 2009). U.S. go vernment also took over mortgage lending giants Fannie Mae and Freddie Mac as the teetered near collapse (Kartnitschnig, M. et al, 2008). The U.S. government also offers setting up of Troubled Assets Insurance Financing Fund (TAIFF), to help financial institutions have a chance to purchase insurance from government to guarantee their troubled assets (Ghosh, S. Mohamed, S., 2010). By those actions, it could show that US government is complying with the stakeholder theory. As the US government intervenes with those funds, it shows an act in interest of the corporations to ensure survival of the firm, safeguarding long term stakes of each group, and holds that managements fundamental obligation not to maximize the firms financial success, but to ensure its survival by balancing the conflicting claims of multiple stakeholder (Kartnitschnig, M. et al, 2008). Although the fundamental obligation was not to maximize firms financial success, but there fiduciary duty also stated to act in the interest of shareholder, and shareholder does want returns on their investment. Therefore the U.S. lend the $85 billion to AIG, but in return to U.S. government, U.S. government would be entitled to 79.9 equity stakes in form of warrants and 2 year loan will have Libor + 8.5% interest rate (Kartnitschnig, M. et a, 2008). This show both short term and long term consequences of this government intervention generate a positive outcome, as for the short term, US government sustain those companies from bankruptcy, so it does not worsen the financial crisis, hurting more people in their financial situation. For the long term, the US government benefit from the interest rate that they get from those banks. But from bailouts, it could also bring negative short-term effects, such as higher taxes, bigger government and lower salaries (Taylor, M., 2007). As well as for long term, it could bring negative effects, such as government abandoning fiscal discipline, asset bubble or inflation could occur and commodities bubble driven by negative real interest rate (Peng, B.,2008). In conclusion, this essay has discussed about the global financial crisis that struck United States. It discussed the measures that US government took to protect these financial institutions, such as TARP or TAIFF. It also have discussed and related shareholder and stakeholder models of corporate social responsibility with the Global Financial Crisis, by justifying US government action from either of these models and analyzing the short and long term consequences of the government intervention, and the conclusion that the action that US government has taken for this current situation was best for society, as if US government have not taken those steps. It could have worsen the financial crisis and have a greater impact to others countries, just like a domino affects. Cause United States is a super power country, which have a lot of impacts to other countries in this world. By taking those s teps, it was best for this society. Don’t waste time! Our writers will create an original "US Institutions in the Global Financial Crisis" essay for you Create order

Unit Shc22 - Introduction to Personal Development in...

SHC 22 1.1 Describe and explain the duties and responsibilities of your own work role. I work in a team with another childminder, sharing the same premises, so we share some of duties, but generally speaking, both of us are responsible for the children we looking for. My duties starts in the morning when I have to welcome the children, to help them getting the schuss changed and the coats tacked off, to record the time they came in and some information from parents if applicable. It is my responsibility to prepare the food for children and in the meantime to get involved in their activities. We support the children in their personal development in different ways: explaining situations, setting some interesting activities for†¦show more content†¦I do have a lot of information but the most important thing is how to use it. I started with my starting points, my previous experience. Firstly I am mother of two children, one grown up and one teenager. When they were younger, I used to collaborate with all the professionals involved in their education. For three years I worked as teacher in my country. Before starting the childminder course, I worked as childminder assistant for Viorica Timco and she advised me to complete this course because I have the skills to work with children in Early Years. I did this and I am registered childminder from September 2011. In March I had my first inspection and the service I was providing was classed only satisfactory, because some of my weaknesses including the missing of the self-evaluation. Of course there were lot of positive things such as an acceptable partnership with parents, supporting children learning English as an additional language, the measures to safeguarding the children, the food-safety and the first aid training, completion the course KIDS for children with special needs. The premises are used appropriately, providing sufficient space for play, rest and dinning. Play resources are varied, reflective on the six areas of learning; the children are given the opportunity to have their own choices. After starting the self-evaluating process I was trying to find out the ways to

Contemporary Accounting TFV Concept

Question: Discuss about the Contemporary Accountingfor TFV Concept. Answer: Introduction Nowadays, the true fair view is an important accounting standard. The word accounting standard enhances the importance of the TFV concept automatically. The main reason behind it is that accounting standards are major part of the corporate reporting frameworks; and such frameworks are completely followed by the Companies acts or laws. Along with this, the TFV concept does not have any statutory definition; but it has its own importance in IFRS (International Financial Reporting Standards) and UK GAAP (Generally Accepted Accounting Principles). These international accounting standards make the true fair view legal as well as reliable. Moreover, the concept of TFV has authoritative statements that are written by British Judges named as Lord Hoffmann and Dame Mary Arden. In view of that, it has become a central part of the accounting, financial and auditing practices of the business organizations. In addition to this, in this research paper, a literature review is conducted to explain the history as well as historical purpose of the true fair view. Additionally, the literature review would also be beneficial to portray the extent to which the regulatory environment for financial reporting of Australia supports the true fair view. Literature Review History As Well As Historical Purpose of the True Fair View (TFV) In the views of Nobes Parker (1991), the concept of TFV does not have any legal meaning and definition. But, it has legal opinions and judgments as well. Along with this, the authors further state that the true fair view is a conception that we all hold in common, and therefore, it is not a subject for debate to people. Moreover, the origin and history of the true fair view is still a matter of discussion. The main reason behind it is that, there is an absence of specific acts or laws those may portray the origin as well as history of the TFV concept in a clear way. On the other hand, according to the FRC (Financial Reporting Council), the true fair view originated from the legal opinions authoritative statements of the British Judges Lord Hoffmann and Dame Mary Arden. They put their opinions regarding the TFV concept in 1983 and 1984(Nobes Parker, 1991). As a consequence, it can be considered as an important accounting standard that plays a critical role to improve the accurac y of the financial and audit reports of the business organizations. In addition to this, Chambers Wolnize (1991) state that, the TFV concept was originated earlier in eighteenth century. According to the authors, the origin of the TFV concept is expected in the Companies acts of 1844 and 1856 as well. Along with this, the authors say that the true fair view was developed to measure actual valuation of assets. According to the TFV concept, business organizations were obliged to consider the up-to-date prices in order to estimate the correct value of the assets. Moreover, the occurrence of the TFV concept is related to the accuracy of the financial statements of the business organizations. The authors further state that, the concept of true fair view is also originated from the UK Joint Stock Companies Act, 1844. Under this act, the directors of the business associations are obliged to portray a true fair view in the financial statements, ledger books, and balance sheets of the companies(Chambers Wolnizer, 1991). So, the concept of TFV is a legal concept. It is followed by most of the business firms to demonstrate transparency as well as accurateness in the financial statements of the businesses. On the other hand, in the words of Deegan, Kent Lin (1994), the true fair view is an accounting standard. It is related to the International Financial Reporting Standards (IFRS) and UK Generally Accepted Accounting Principles (GAAP). In UK, most of the companies has adopted and implement the true fair view to portray intelligibility, reliability, and exactness in their financial statements, and financial reporting as well. Along with this, under the Companies Act 2006, the financial directors of the business associations are require to make obvious true and fair view in their financial functions as well as auditing practices. They are legally bound to ensure that the financial reports of the businesses are competent to provide a true fair view in an effectual and a more comprehensive manner(Deegan, Kent, Lin, 1994). Moreover, the financial experts of the business firms are conscientious to make sure that the financial statements and audit reports of the businesses are compliant with the pre-determined accounting standards. In addition to this, according to the authors Caroline Ann (2008), the true fair view was invented in Great Britain in the year 1844. There are numerous historical purposes those brought the concept of TFV earlier in the eighteenth century. For case, the major purpose of the TFV concept is to fulfill the conditions of true fair in the financial reports and balance sheets of the companies. The authors further state that, the other purpose of TFV concept is to eradicate the errors and misstatements that may occur in the financial statements, ledger books, and audit reports of the businesses. Moreover, it aims to develop an effectual relationship between internal accounting and external accounting to understand all the major aspects related to accounting and finance in an accurate manner(Caroline Ann, 2008). On the whole, the historical purpose of TFV concept is to exemplify a true fair in the financial reports; and also to maintain accurateness, clearness, and trustworthiness in t he financial statements as well as balance sheets of the business organizations. In the same manner, Vladu, Mati Salas (2012) state that, the TFV concept is a vibrant concept that has authoritative judgments of the judges. It is a part of English law. The authors affirm that it initiated from the generally accepted accounting principles. The purpose of the TFV concept is to make certain that the financial reports as well as financial statements prepared by the business firms are able to fulfill all the requirements and conditions of the international accounting standards. Moreover, it aims to demonstrate a true fair view in the accounting practices, accounting functions, ledger books, finance audit report of the businesses (Vladu, Matis, Salas, 2012). In this way, the different opinions of the different authors make it a part of the Companies act. Moreover, to show transparency and accuracy in the financial auditing practices, financial reports, and financial statements cab be considered a major historical purpose of the TFV concept. Extent to Which the Australian Regulatory Supports the Concept of TFV Currently, the true fair view has been implemented by most of the nations. But, the adoption as well as implementation of the true fair view is still a major subject of contest in most of the nations. Business organizations do not so much focus on the concept of TFV. It is because of it does not have any official definitions as well as provisions in the constitution. But, the other fact is that, at present times, the TFV concept is accepted by most of the business organizations. They believe that it has legal opinions as well as judgments and; therefore it is a part of legislation(Walton, 1993). Along with this, the TFV is an integral part of the IFRS (International Financial Accounting Standards) and GAAP (Generally Accepted Accounting Principles). In view of that, it has become an important accounting standard. So, the popularity of the true and fair view is increasing on the regular basis. On the other hand, in the words of Nobes Parker (1991), the true fair view is not a subject of discussion. It is a general term that is used by the people in their daily life regularly. In the context of Australia, the TFV concept can be considered a required accounting standard in order to improve the transparency and accuracy of the financial statements as well as balance sheets of the business corporations. Along with this, the Australian regulatory for financial reporting provides support to true fair view within nation. The main reason behind it is that the TFV concept came in subsistence with the continuation of the Victorian Companies Act 1890(Nobes Parker, 1991). Moreover, according to the FRC (Financial Reporting Council), the Australian business associations are compelled to depict true fair picture of the financial statements of the business associations. In addition to this, according to Deegan, Kent Lin (1994), recently, the recognition of the TFV concept is increasing in the Australian business corporations. The Australian regulatory is providing support to the true fair view; so they the corporations may fulfill their financial obligations in an appropriate manner. Furthermore, the Australian Securities Commission (ASC) affirms that the concept of TFV is a basic component of the Australian financial reporting as well as auditing. True fair view is a fundamental part of the Corporations Act. According to the Corporations Act (Section 297), the business corporations are obliged to build true fair financial statements; and to show accuracy in the financial statements of the businesses(Deegan, Kent, Lin, 1994). Moreover, as stated in the section 297, the Australian regulatory environment for financial reporting provides guidelines to business associations; so they may depict a true fair view in the financial and audit reports of the organizations. In the same manner, in the words of Kilgore, Leahy Mitchell (1999), the Australian regulatory environment for financial reporting is strict about the adoption and implementation of accounting standards in the accounting practices of the businesses. It focuses on the true fair view as accounting standard. According to the Australian regulatory environment, the TFV concept is an element of the IFRS and UK GAAP. As an accounting standard, the true fair view is competent to fulfill the criterion that is determined by the IASB (International Accounting Standards Board) (Kilgore, Leahy, Mitchell, 1999). Along with this, the Australian regulatory distinguishes the TFV concept from three aspects. The first one is that it is an advanced accounting standard. The second is that the TFV concept performs in accordance with GAAP. Moreover, the third one is that it is useful to predict inconsistent prospects that legislations of nations do not cover. In view of that, the TFV concept becomes a l egal concept in the eyes of business organizations. On the other hand, Nobes Parker (1991) state that, the Australian regulatory environment for financial reporting give support to the concept of TFV. According to the regulatory authority, the business organizations are legally obliged to show a true fair view in their financial reports to fulfill the general purposes related to the field of accounting. Along with this, the TFV concept is everlasting; and changes in the accounting framework do not influence the true fair in a negative manner. It is a key part of the IFRS as well as GAAP. In other words, it also can be said that, the TFV concept is very much similar to the accounting standards(Nobes Parker, 1991). Moreover, the Australian regulatory environment considered the TFV concept as a fundamental requirement of Australian corporate reporting. On the whole, the Australian business firms are obliged to show a true fair view about the financial performance as well as position of the businesses. The Australian regulatory envir onment is fully in the favor of the true fair view to improve the transparency as well as truthfulness in the financial statements and finance audit reports of the companies. Apart from this, in the views of Karan (2002), the true fair view is not a new concept for the Australian organizations. It has been in the companies legislation from the time when the Victorian Companies Act of 1890. This thing shows that the Australian regulatory is providing support to the concept of TFV since eighteenth century. Along with this, under the section 296, the Corporations Act 2001 makes the TFV concept mandatory for the business associations. The statutory provisions of the Corporations Act 2001 affirm that the TFV concept overrides the material errors as well as misstatements to improve the accuracy of the financial statements of the business organizations in an effectual and a significant manner(Karan, 2002). In view of that, it can be said that, the concept of TFV is a popular concept in the area of financial reporting. It plays a significant role to improve the efficiency of the financial statements and balance sheets of the businesses. As a consequence, the Aus tralian regulatory environment for financial reporting fully supports to the notion of TFV. Conclusion On the basis of the above analysis, it can be concluded that, the true fair view is originated in the eighteen century. The TFV concept does not have legal definition. But, it is popular in all over the world. Along with this, it is also observed that, the historical purpose of the TFV concept is to reduce errors and to improve the accuracy of the financial statements of the organizations. Moreover, it is similar to accounting standard. In view of that, the Australian regulatory environment for financial reporting is completely in the favor of the true fair view. Works Cited Caroline, J., Ann, S. (2008). A true and fair view: harmonization of the accounting. European Journal of Management , 8 (2). Chambers, R. J., Wolnizer, P. W. (1991). A true and fair view of position and results: the historical background. Accounting, Business Financial History , 1 (2), 197-214. Deegan, C., Kent, P., Lin, C. J. (1994). The True And Fair View: A Study Of Australian Auditors Application Of the Concept. Australian Accounting Review , 4 (7), 2-12. Karan, R. (2002). Irreconcilable Legal and Accounting Views of A True and Fair View: An Emerging Alternative from Australian Reforms. Journal of Law and Financial Management , 1 (1), 44-52. Kilgore, A., Leahy, S., Mitchell, G. (1999). The true and fair view concept: evidence from Australia . Asian Review of Accounting , 7 (1), 96-111. Nobes, C. W., Parker, R. H. (1991). True and Fair: a survey of UK financial directors. Journal of Business Finance Accounting , 18 (3), 359-375. Vladu, A. B., Matis, D., Salas, O. A. (2012). True and fair view and creative accounting conceptual delimitations based on Papineau's tree methodology. Annales Universitatis Apulensis: Series Oeconomica , 14 (1), 104. Walton, P. (1993). Introduction: the true and fair view in British accounting. European Accounting Review , 2 (1), 49-58.