Question

Is accounting’s focus on economic transactions a strength or a weakness?

Answer 1

Accounting plays an essential role in economic development. High-quality corporate reporting is key to improving transparency, facilitating the mobilization of domestic and international investment, creating a sound investment environment and fostering investor confidence, thus promoting financial stability. A strong and internationally comparable reporting system facilitates international flows of financial resources while at the same time helping to reduce corruption and mismanagement of resources. It also strengthens international competitiveness of enterprises in attracting external financing and taking advantage of international market opportunities.

In the wake of various financial crises continued efforts are being made towards improving the quality of corporate reporting as an important part of measures towards strengthening the international financial architecture. In this regard the implementation and application of internationally recognized standards, codes and good practices in the area of corporate reporting has been strongly encouraged as a reflection of the increasing pace of globalization and international economic integration. However, the effective adoption and implementation of such standards and codes remains a challenge for many developing countries and economies in transition as they lack some of the critical elements of corporate reporting infrastructure – from weaknesses in their legal and regulatory frameworks, to lack of human capacity and relevant support institutions. In the face of these challenges there is a need for a coherent approach to building capacity in this area, as well as for tools to measure and benchmark progress and identify priorities for further actions.

Follwing are the summary of how accounting could be say that strong

• they encourage transparency and easy comparison in transactions that cross borders and jurisdictions

• translation and reconciliation costs are removed

• all companies have improved ability to attract capital from a larger pool of investors, driving down costs of capital

• opportunities for regulatory arbitrage are eliminated.

Conclusion

So it is clearly evident that Accounting's focus on economic transactions a strength.