Watts’ accounting regulation explanations and evidence have important implications for accounting regulators (Watts 2003). Asymmetry in litigation leads to asymmetry in regulator’s cost. In essence, what Watts is saying is that, conservatism cuts the political expenses on regulators and standard setters. Moreover, to decrease taxes and increase a firm’s value, there must be an asymmetry between gains and losses. If a firm under report profits they will pay less money, hence there is a direct link between profits and
. To ensure price stability is maintained the Reserve Bank adjust the OCR which influences prices in the economy. Price stability, which is when the purchasing power of money stays constant, is a desirable outcome of the government because inflation has several negative impacts on household and firms. Inflation erodes the values of households’ savings and causes those on a fixed income to lose purchasing power, the quantity of goods a set amount of money will buy. For firms, inflation causes cost or production to income since workers’ demand pay rises, as well as making it difficult to firms to plan for future.
For this imbalance to be automatically corrected, it is necessary that exports become cheaper to foreigners who would then presumably buy more and that imports become more expensive to domestic buyers who would then presumably buy less. Secondly, these relative price changes must be effective in reducing the trade deﬁcit. This means that they must raise the money value of exports relative to that of imports. The opposite is perfectly
(Koves and Marer, 1991). The introduction of incentives for exports brought China a step closer to trade liberalization as they reduced the biasness for exports. Chinese government effectively managed trade liberalization using 3 mechanisms in order to improve economic performances. Firstly shock effect; pushes most domestic firms to produce at highest potential efficiency under high competitive market. The increasing number of foreign investors in China will have negative impact on the economy without government’s intervention.
Protectionism weakens the industry. Without competition companies cannot progress because the domestic product will reduce its quality and increase its price as it will have no competitor. If any country loses its borders other countries will do the same this decreases the economy of country. In my point of view free trade is far better than protectionism. Though protectionism has a lot of advantages but in long term protectionism has many dark aspects as it specifies the trade of the country whereas free trade opens the barriers of the trade which welcomes international investors an firms to invest in country that helps in increasing the economy of the country.
While some may see it as a blessing, others may see it as a curse. How can these minerals and oil reserves be a curse when they generate huge foreign exchange? These resources become a curse when they do more harm than good. This curse may come in the form of slow growth, a decline in her tradable sector due to the appreciation of her currency among others. In most cases, the new opportunity found is embarked upon at the expense of existing opportunities (goods that are exported by a country).
This is known as “arms-length” trading , because it is the product of genuine negotiation in a market. This arm’s length price is usually considered to be acceptable for tax purposes. But when two related companies trade with each other, they may wish to artificially distort the price at which the trade is recorded, to minimise the overall tax bill. This might, for example, help it record as much of its profit as possible in a tax haven with low or zero taxes. Tax law starts from the assumption that the application of the arm’s length standard will reduce the interference of tax effects with bona fide business decisions taken by the corporate management.
There are basically two arguments why fair value accounting can donate to pro-cyclicality. The first argument is that fair value accounting and asset write-ups allow banks to raise their leverage during economic expansions, which in turn makes the financial system more vulnerable and financial crises more severe. The second argument is that fair value accounting can cause corruption in financial markets. The idea is that ―banks may or have to sell assets at a price lower than the major value and that the price from these forced sales becomes applicable to other institutions that are required by fair value to mark their assets to market. Fundamental value differs from fair value in the following
This policy also makes consumption to be more attractive corresponding to savings. Exporters earn from inflation for products they sell is at lower prices. Contractionary is done to stop high inflation rates. Narrowing money supply does not allow business expansions and spending and negatively affects exporters thus reducing aggregate demand. Fiscal policy happens when an alteration takes controls of employment and household income which determines consumer’s spending and investment on different resources.
Along these lines, unemployment may decrease, as this has different favorable circumstances, for example, lower government using on profits and less social issues. However, this phenomenon includes a number of different expenses. Firstly, if economic growth is unsustainable and is higher than the long run pattern rate, inflations are liable to be seen. An increase in economic growth could prompt an equalization of issued installments. In case the expanded customer expenditure causes further development, there will be an increase in the import sector.