The Disclosure Framework - Essay Example

? Disclosure Framework Accounting regulations are very significant in growth of all organizations. Every organization is supposed to have proper accounting regulations that will be used to address different problems. Currently, accounting regulation is at a crossroads, many people think that we need a more formal disclosure framework to guide disclosure. This is because material disclosure is one of the most significant aspects in an organization. There is supposed to be a very clear disclosure framework for both producer and consumer. This is because a formal disclosure framework helps to guide regulators, and preparers towards better and more material disclosure. However, while material disclosure is supposed to be free and within a given time frame, there are numerous cases where preparers have failed to disclose significant materials to users or vice-versa. This fact has been associated with the idea that many organizations lack proper disclosure framework (White, 2009, p.67). It was this lack of proper disclosure framework that led IASB to carryout survey recently about disclosure framework, and found that regulators, preparers and users are supposed to work together so as to improve disclosure. All disclosures need improvement. Disclosure is supposed to be guided by materiality, and that principle based disclosure guidance would be essential. This study will be therefore examining why regulators, preparers and users are supposed to work together so as to improve disclosure. All disclosures need improvement. Disclosure is supposed to be guided by materiality, and that principle based disclosure guidance would be essential According to United States Congress Staff (2002, p.788), one of the most significant findings of IASB is that disclosure should be guided by materiality. This implies that information disclosure that is in existence currently is not based on material, or material disclosed is not adequate to support whatever is being disclosed. Hence, there is need to be producing adequate materials to support disclosed information. This issue of disclosure being guided by materiality has been used in the financial market infrastructures (FMIs). Hopkins (2007, p.234) asserts that there are many key issues that are being debated in regard to accounting regulation. The main issue is a clear and comprehensive disclosure of information related to sound decision making by market participants, authorities, and the public. Majority of people held the view that crucial information regarding funds and expenditure has always been concealed from the users or in case where it is given, it is not clear and comprehensive. This fact has raised many concerns among the people who want that information disclosure should be improved because it has been facilitating corruption. Due to this increased demands, many organizations are implementing disclosure policies as they have started to come up with succinct disclosure framework. For instance, Financial Market Insurers (FMIs) have implemented a disclosure framework that was organized to supplement the CPSS-ISCO principles for financial market infrastructures, and help it in providing the comprehensive degree of disclosure that is expected of them under Principle 23 on disclosure of rules, main processes, and market data (Fung et al., 2007, p.140). According to Bunger (2012, p.337), the disclosure framework was prepared in association with the CPSS-IOSCO Assessment methodology for the principles for FMIs and the accountabilities of the authorities to ensure a common framework that will reduce burden on FMIs and give assessors a basic set of information from which to start their assessment of FMIs. Heated debate about accounting regulation that calls for a formal disclosure framework has led to establishment and implementation of new rules and regulation that governs information disclosure. For instance, federally tax-exempt organizations stated under IRC sections 501(c) and 501(d) ought to comply with the lately amended law and regulations dealing with public disclosure of certain types and related materials they have submitted to the IRS. These consist of any yearly information returns, whose needed or actual filing date was in the previous three years, which generally means the three most recent returns. These yearly returns use Form 990 and its variants for 501(c) organizations, and Form 1065 for 501(d) organizations (Lu, 2008, p.17). An organization ought to make copies of an application accessible to the public if it filed its application for tax-exempt status or owned a copy of its application materials on that date. All schedules, attachments and additional supporting material presented with the yearly return and application also ought to be disclosed, with the exemptions noted below. Public access ought to be offered punctually on request by permitting inspection of the documents the office(s) of the organization, and by offering copies of the documents punctually in response to any in-person request or within one month for a written request. Nonetheless, it is not a must for organizations to give copies if they make these materials readily available via internet publications, or if it is determined by IRS that the organization is being subjected to a pestering campaign. The organization is allowed to demand payment in advance for real postage costs incurred and a copying fee of up to one dollar for the first page and $0.15 for each page thereafter (Kraft et al., 2011, p.83). The request maybe for specific documents alone, or specific portion of documents in which case the charges ought to be for those pages alone. NPO staff members who do not fulfill this new law and regulations are subjected to fines and other penalties individually and not as an organization. Lee (2008, p.99) states that in the course of the 3-year period starting with the due date- including extension if there is any- of the form 990, or form 990-EZ, an organization ought to make its return available for public inspection on request. All sections of the return and all needed schedules and attachments, apart from the contributor’s schedule to the organization ought to be made available. Inspection ought to be allowed in the course of regular business hours at the principal office of the organization and at each of its regional or district offices having three or more workers. This provision is applicable to any organization that files Form 990, or Form 990-EZ in spite of its size and whether or not it has any paid workers. An organization ought to make part of any additional information of the return it offers for public inspection if it furnishes extra information to IRS to be made section of its returns due to an examination or correspondence from the service center. An organization ought to also offer a reasonable location for a requester to inspect annual returns of an organization if it does not maintain a permanent office. Requester maybe emailed the information by an organization. Nevertheless, copying and postage alone can be charged by an organization only if the requester gives up the right to a free inspection. Any individual who does not comply with the public inspection requirements will be fined a fine of $20 for every day inspection was not allowed, up to a maximum of $10,000 for every return. No fine will be imposed if the failure is because of reasonable reason. Any individual who fails intentionally to fulfill, will be subject to an extra fine of $1,000. Any section 501(c) organization which presents an application for recognition of exception to the Internal Revenue Service (IRS) after July 15, 1987, ought to avail a copy of its application and any letter or additional document issued by IRS in response to the application for public inspection (O'Reilly, 2000, p.11). An organization which submits its exception application on or prior to 15th July 1987 also ought to comply with this requirement suppose it had a copy of its application on 15th July 1987. The copy of the application and associated documents ought to be availed for inspection in the course of regular business hours and the main office of the organization and at each of its district or regional offices having at least three workers as in the case of yearly returns. In conclusion, a formal disclosure framework will be of great significance to all producers and consumers. This is because it will help them to access and inspect essential information and materials upon request. Easy access and disclosure of information and materials upon request will help to save loss of resources and capital through theft and fraud that have become rampant across the world. This will increase trust and confidence among users and preparers hence smooth workflow. Bibliography Bunger, D, 2012. Deficits In Eu and Us Mandatory Environmental Information Disclosure: Legal, Comparative Legal and Economic Facets of Pollutant Release Inventories, New York: Springer. Foley, B, and Maunders, K, 1979. Accounting information disclosure and collective bargaining, London: Holmes & Meier Publishers. Fung, A, Graham, M, and Weil, D, 2007. Full Disclosure, The Perils and Promise of Transparency, Cambridge University: Cambridge University Press. Hein, P, 1983. Business information: protection and disclosure: the Freedom of Information Act and related laws, New York: Law & Business, Inc./Harcourt Brace Jovanovich. Hopkins, B, 2007. The Law of Tax-Exempt Organizations, New York: John Wiley & Sons. Kraft, M, Stephan, M, and Abel, T, 2011. Coming Clean: Information Disclosure and Environmental Performance, Oxford: Mit Press. Lee, D, 2008. A Socio-cognitive Model of Information Disclosure in Human Computer Interaction, Washington D.C.: ProQuest. Lu, S, 2008. Information Disclosure, Competition and the Behavior of Firms: Evidence from Nursing Homes, Washington D.C.: ProQuest. O'Reilly, J, 2000. Federal information disclosure, Volume 2, London: West Group. United States Congress Staff, 2002. United States Code, 2000, Title 26: Internal Revenue, Sections 1001-End, New York: Government Printing Office. United States. General Accounting Office, 1988. Information disclosure: Government in the Sunshine Act compliance at selected agencies: report to the chairman, Subcommittee on Federal Spending, Budget, and Accounting, Committee on Governmental Affairs, U.S. Senate, New York: The Office. White, G, 2009. Sustainability Reporting: Managing for Wealth and Corporate Health, New York: Business Expert Press. Read More