Different Sources Of Finance And Different Legal Systems

Question 1 (a): Outline in your own words the key, PRE-IFRS, developmental factors that can differ across countries (e.g. different sources of finance and different legal systems). In your answer, summarise the differences and any similarities between the development factors of China and Australia. It seems that the key issue facing global financial markets and international investors is worldwide accounting diversity as considerable differences exist across countries which inevitably leads to chaos in global capital markets as different amounts are being reported on balance sheets and income statements (Doupnik Perera, 2012, p. 23). This type of environment can create extensive opportunities for corruption and poor performance and it is†¦show more content†¦Source of funding is regarding who owns the shares in the most powerful listed companies within each nation. The major sources of financing for business are either family members, banks, governments, or shareholders (Doupnik Perera, 2012, p. 29). For example, due to being a communist state with very little opportunity for private ownership, China’s major company financing is dominated by the Chinese government as well as their government controlled banks (Fernando, 2010). This can be seen in one of Chinaâ €™s largest companies, Petro China, as its controlling shareholder, the China National Petroleum Corporation (CNPC), is wholly state-owned (PetroChina, 2015). Sources of finance from governments and their government controlled banks means that there is less pressure for public accountability and information disclosure (Doupnik Perera, 2012, p. 29). In contrast, Australia runs a free market economy where private business enterprises seem to dominate. This can be seen in one of Australia’s largest companies, BHP, who are privately owned by millions of dispersed shareholders such as private investors, superannuation funds and corporations (Stockzoa, 2016). This is important to note as more information is available and demand for disclosure occurs the more privately owned companies are dependent on funding from the general population (Doupnik Perera, 2012, p. 30). The two major types of legal systems