Accounting Standards and Financial Intermediaries

Application of Accounting Standards in Financial Market

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A financial market is a public trading centre for buying and selling items such as investment securities and commodities. The items to be traded are usually expensive; therefore a non biased platform should be set to regulate the transactions conducted in the trade. The accounting standards provide this basic and necessary regulation by setting a marketing level. This is through assisting in the identifications of risks expected during the transactions as the accounting principles offers a window of transparency. The principles provide this by the inclusion of clauses that require every company to avail full disclosure of its materiality, whether in good or bad state to the company record. The information should be fully outlined in the financial statements of the company. Through this, parties trading at financial markets do not find a hard time selecting their customers and what value to indicate on the items to be traded. Accounting standards also help companies to compare themselves as it provides a consistency in all financial statements of companies that use this method.

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How Financial Intermediaries Lower Transaction Cost

For a person willing to invest in the financial markets, the challenge of transaction cost comes to mind as the market has flooded with brokers. The best solution for this person is to do these transactions through a financial intermediary system. Such an institution  bundles up all the willing investors funds .With the huge amount of money ,the investment value increases and the  transaction cost is wavered .When the cost get wavered the small transaction cost get divided among all investors and this reduces the transaction cost per person.

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The institution also lowers the transaction cost by the ability to adapt and merge with relevant upcoming technologies, trading and financial agents such as mobile banking, hotlines and websites. This enables customers to check any information regarding their accounts at affordable rates if not free. It also enables them to do transactions online, which lowers broker fees and need.

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