Compare and contrast the Anglo-Saxon financial reporting model with the continental model.
What will be an ideal response?
ANSWER:
The Anglo-Saxon (sometimes called the Anglo-American model) financial reporting model features the presence of a strong accounting profession, a somewhat limited role of government, the importance of securities markets for raising equity capital, and an emphasis upon the true and fair view of audited financial statements. The true and fair view refers to the use of judgment in order to make financial statements useful instruments for making investment decisions, as opposed to ensuring that they have been presented correctly in accordance with legislative fiat. The continental model generally presents a relatively weak accounting profession; reflects strong governmental influence upon accounting regulation and organization, including the primacy of tax influences and the protection of creditors in financial statement presentation rather than for investor needs; and emphasizes the importance of debt financing through major banks rather than the raising of equity capital. The continental model emphasizes legalistic form over economic substance.
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