Financial Accounting · The regulatory framework

Sources of Regulation: Law, Standards and Listing Rules

Updated 11 October 2026 · Fact-checked

Financial reporting is regulated by three main sources: company law, accounting standards (IFRS Accounting Standards) and, for listed companies, stock exchange listing rules. Law sets legal duties and penalties. Standards set how items are recognised, measured and disclosed. Listing rules add extra disclosure and governance duties for listed companies. In exams, match each rule to its source.

Understand Sources of Regulation: Law, Standards and Listing Rules

Companies must report in a way that users can trust. To achieve this, rules come from more than one place. Each source has a different job and a different power to enforce.

Company law is made by a country's government. It says that companies must keep accounting records, prepare financial statements, have them audited (in many cases), and file them with a registrar. It also covers directors' duties and the rules on paying dividends. Law is binding. Breaking it can lead to fines or other penalties. Company law differs from country to country.

Accounting standards are detailed technical rules. IFRS Accounting Standards are issued by the IASB. They say how to recognise, measure, present and disclose items such as inventory, non-current assets and provisions. A standard has no force of its own. It gains force when law or a regulator requires companies to follow it. In many countries, law requires listed companies, and sometimes others, to use IFRS.

Stock exchange listing rules apply only to companies whose shares are traded on that exchange. They are extra conditions for being listed. Examples are publishing results within a set time, disclosing price-sensitive information and following a governance code. The sanction for breaking them can include public criticism, suspension or removal from the exchange.

The sources work together. Law gives the framework and enforcement. Standards fill in the technical detail. Listing rules add more for listed companies. If there is a conflict, the law of the country normally takes priority, because standards only apply where the law allows or requires them.

Key formulas to remember

Company law: Made by government → legally binding → penalties for breach; Covers records, filing, audit, directors' duties and dividends. Varies by country.
Accounting standards: Issued by IASB → detailed recognition, measurement, presentation, disclosure; Binding only where law or a regulator requires them.
Listing rules: Set by stock exchange → apply only to listed companies → extra requirements; Sanctions include suspension or delisting rather than criminal penalties.
Priority if there is a conflict: National law > standards (where the law overrides); Standards operate through the law of the country, so law normally prevails.

How to solve Sources of Regulation: Law, Standards and Listing Rules questions

Use this method for any question asking who requires something or which source applies.

1Read the scenario and find the requirement being described, such as filing accounts, measuring inventory or publishing results.
2Decide its type: a legal duty, a technical accounting treatment, or an extra rule for listed companies.
3Legal duty or penalty, or directors' duties: choose company law.
4How to recognise, measure or disclose an item: choose accounting standards.
5Only listed or traded companies are affected, or the rule is about exchange membership: choose listing rules.
6Check whether the entity is listed. If it is not, listing rules cannot apply.
7If sources appear to clash, remember that national law normally prevails, because standards apply through law.

Quickest way: Three-word sort: Law, Standard, Listed

When to use it: Use this for objective test questions that ask you to match a requirement to its source.

Ask: does it say a company MUST do something with a penalty? That points to law.
Ask: does it say HOW to account for or show an item? That points to a standard.
Ask: does it mention a LISTED company or the exchange? That points to listing rules.
Eliminate any option that applies listing rules to an unlisted company.
For multiple response, pick exactly the stated number of options.

Common mistakes in Sources of Regulation: Law, Standards and Listing Rules

Saying accounting standards are laws in themselves.
Students see that companies must follow them and assume they are legislation.
Fix: Say standards become binding only when law or a regulator requires them.
Applying listing rules to every company.
The word 'regulation' feels general.
Fix: Listing rules apply only to companies listed on that exchange. Check the scenario for 'listed'.
Putting detailed measurement rules under company law.
Students think law covers everything about accounts.
Fix: Law sets the duty to prepare accounts. Standards give the detailed treatment of items.
Assuming the same company law applies worldwide.
Students learn one country's rules and generalise.
Fix: State that company law is national and differs between countries. IFRS aims for consistency across them.
Thinking IFRS overrides national law when they conflict.
IFRS is described as international, so it sounds higher.
Fix: Remember that IFRS has effect through national law, so law normally takes priority.

Worked examples

Example 1

A company's directors must file its financial statements with the national registrar within a set time, and face a fine if they fail. Which source of regulation creates this requirement? Options: A Company law; B Accounting standards; C Stock exchange listing rules; D The company's own policy.

Show the solution

The requirement is a duty to file with a registrar.
A fine is a legal penalty, so the rule is a legal duty.
Standards deal with accounting treatment, not filing. Listing rules apply only to listed companies, and the question does not say the company is listed.
A company's own policy cannot create a fine.

Answer: A: Company law.

Example 2

Explain how company law, accounting standards and listing rules each regulate the financial reporting of a listed company, and say what happens if law and a standard conflict.

Show the solution

Company law: requires the company to keep records, prepare and file financial statements and often have them audited. It also sets directors' duties. It is binding, with penalties.
Accounting standards: IFRS Accounting Standards set how items are recognised, measured, presented and disclosed, so that statements are comparable and reliable.
Listing rules: because the company is listed, the exchange adds requirements such as timely publication of results and disclosure of price-sensitive information. Sanctions include suspension or delisting.
Conflict: standards operate through national law or regulators, so national law normally takes priority.

Answer: Law sets binding duties and penalties, standards give the technical accounting rules, and listing rules add extra duties for listed companies. If law and a standard conflict, national law normally prevails.

Exam tips

In objective tests, look for trigger words: 'penalty' or 'directors' duty' means law; 'recognise' or 'measure' means standards; 'listed' means listing rules.
Check whether the company is listed before choosing listing rules.
Never say standards are law in themselves. Say they are given force by law or regulators.
For multiple response questions, select exactly the number asked. Do not guess extra options.
Remember that company law varies by country. Questions may use an international setting with $ figures.

Practice questions from The regulatory framework

Sources of Regulation: Law, Standards and Listing Rules in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Sources of Regulation: Law, Standards and Listing Rules: frequently asked questions

What are the main sources of regulation of financial reporting?

They are company law, accounting standards such as IFRS, and stock exchange listing rules. Law gives binding duties. Standards give technical rules. Listing rules add requirements for listed companies.

What is the difference between IFRS and company law requirements?

Company law sets legal duties such as keeping records, filing accounts and directors' responsibilities, with penalties for breach. IFRS sets how to recognise, measure and disclose items. IFRS applies only where law or a regulator requires it.

Do listing rules apply to all companies?

No. They apply only to companies whose shares are listed on the relevant stock exchange. They are extra conditions on top of law and standards.

Which prevails if company law and a standard conflict?

National law normally prevails. Standards have effect through law or regulators, so a legal requirement takes priority where the two clash.