Federal debt Research Paper Example | Topics and Well Written Essays - 750 words

Federal debt - Research Paper Example all the state loans whether it is incurred for exploiting the natural resources of a country or for meeting or preparing for the war, or any commercial purposes, etc. is termed as Government Debt. (Hansen, 1941) The federal debt is created because the annual deficit of the government when the receipts of the government in a current year falls below the government spending. (Butler) This deficit is the amount that the government has to finance from other sources. The nature of the government debt is such that it is the debt of the people of the country which is why it is also known as the public debt as the government has to repay that debt by the amount it generates from the public in form of taxes. Therefore, it can be said to be the taxpayer’s indirect debt. (Peavler) State can raise loans in different forms. It may obtain loans from people within the country or from other states or by issue of inconvertible paper currency. There is always a limit of borrowing in each case whichever method is adopted by the state. If that limit is crossed, the country is bound to suffer. We discuss below the various forms of state borrowing and also the limit to which the state can borrow. When the state finds it difficult to raise its revenue by taxation then it resorts to borrowing from citizens and financial institutions within the country. That may fall into short term loans or long term loans or both. Now, it depends upon the socio-economic conditions of the country that how much loan the state will obtain. The state can also raise loans from the Central Bank of the country. The Central Bank purchases the government securities, bonds and debentures from the government and advances loans against them. It is that loan which is raised through international money markets, foreign governments and international agencies such as IMF. When state requires wealth, it makes effort to get as much loan as it can from other states. Foreign governments take into account many

Financial Reporting Systems and Economic Development Essay

Financial Reporting Systems and Economic Development - Essay Example The role of the financial reporting system, as supported by accounting standards, the law and the ethics, in economic development is reviewed and analyzed in this paper. Particular emphasis is given on faithful representation, as an indicator of the reliability of financial statements. Also, the circumstances under which true and fair override apply are identified and explained. It is proved that faithful representation, in its current form, is something more than simple a compliance with accounting standards. One of the most critical issues when having to evaluate the quality of financial statements is that these statements should achieve faithful representation. In order to understand the role of ‘faithful representation’, as an element of the financial reporting systems, it would be necessary to refer to these systems, as the basis on which a firm’s financial practices are usually based. In accordance with Uddin et al., two major financial reporting systems are considered as the most credible for businesses in all sectors: the US Generally Accepted Accounting Principles (US GAAP) and the IFRS.1 The use of one of these systems, which have been appropriately tested as of the effectiveness in financial reporting, results to the increase of credibility of the local economy. From this point of view, it has been proved that the use of these systems within a particular country leads to the increase of the foreign direct investment (FDI) to the above country. Thus, accounting standards and financial reporting are closely related to the performance of the local economy, of course under the terms that global financial markets are stabilized, i.e. that these markets do not suffer from delays in the implementation of financial and other projects. In the literature the term ‘faithful representation’ has been given various explanations, which are all similar. For example, in the study of Hussey reference is made to the use of the term fait hful representation in order to show the reliability of the financial statements involved.2 In other words, the specific term is used in order to indicate the fact that the information included in the financial statements is accurate and responds to the actual financial status of the organization. Apart from reliability, the term ‘faithful representation’ also reflects the completeness of information included in the financial statements.3 The financial statements are considered as complete when they include all necessary information.4 A similar approach in the description of faithful representation is included in the study of Needles et al. In accordance with the above researcher, the term ‘faithful representation’ means that the financial statement involved is ‘complete, neutral and free from error’.5 It is further explained that the phrase ‘free from error’ does not imply the full accuracy of the particular financial statement, a s such requirement is quite difficult, almost impossible, to be achieved since financial statements are highly based on estimations.6 At this point, the following problem appears: how the reliability of financial statements is proved? The fact that there are some transactions that cannot be measured, at least not precisely, is highlighted in the study of Hussey.7 On the other hand, the availability of the data involved is an issue that needs to be carefully considered when having to