International Financial Accounting Reporting

FINANCIAL REPORTING

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. IASB's conceptual framework and accounting concepts........................................................3
2. Importance of different accounting concepts in making financial statements.......................4
CONCLUSION................................................................................................................................6
REFERENCES ...............................................................................................................................7

INTRODUCTION
Financial reporting means process of making financial reporting according to prescribed
standards which is known as financial statements. The report shows the importance of financial
reporting and its usefulness in decision making. The report consists of framework of
international accounting standard board and accounting concepts. The report consists of
objectives of financial reporting and also concepts of financial reporting. It includes assumptions
that financial reporting use which includes recognition, financial presentation etc. It evaluates
various concepts which are accrual, going concern etc. which are important to taken into
consideration while making financial statements.
MAIN BODY
1. IASB's conceptual framework and accounting concepts
The international Accounting standards board has its own framework for financial
reporting. It consists of following rules and regulations that are important when making financial
statements of the company. It addresses the purpose for financial reporting. It focuses on
qualitative information as well. It includes financial statements and its elements. It deals with
recognition as well as de-recognition (Henderson, and et.al., 2015). It measures the financial
statements and depicts value of the firm, it discloses concept of capital and maintenance of
capital.
Objectives of financial reporting
According to IASB, the objectives of financial reporting is to provide information about
financial position and performances of the finances that changes financial position of the
company which aid to economic decision making.
 It provide information to creditors, promoters, investors and help them in making
rational decisions.
 It help in providing information to management of company that help them in planing,
organising and making financial decisions.
 It provide information on optimisation of resources by the company.
 It enhances social welfare by taking care of employees, trade unions and government's
interest. It helps auditors to perform audit in the company.
Concept of financial reporting

 Recognition – To be recognised in financial reporting framework the element must be
associated with some economic benefit which can be outflow or inflow and item's cost
can be measured with reliability. There are 4 elements need to be recognised that are
asset, liability, income and expenses. An asset in recognised in balance sheet that
provides future economic benefits that can be measured. For example – patents. The
liability is recognised in balance sheet when resources of the company outflows and get
settled with reliable amount. Example – bills payable. Income is recognised in income
statement which increases future benefits of the organisation. Example – increase in sales
leas to income. Expenses are recognised when future economic benefit decreases in an
asset. Example – Deprecation of an asset. Financial statement presentation – It discloses requirements for balance sheet and
income statement accounts. This presentation includes classification of various accounts
which includes cash flows, income statements and other equity incomes.
Assumptions of financial reporting
 Relevance - this concept deals with information generated by accounting system that
helps in decision making. The concept deals with relevant information and timeliness
which impact decision making. It deals in qualitative value and is associated with
information that is useful and has value that is predicted and will make a difference when
decision maker will take decisions.
 Faithful presentation – This concept deals with depicting financial reports that reflect
actual condition of business. It considers all the part of financial statements and includes
cash flows, business operations and entity to whom reporting is done. It means the report
was complete, error free and unbiased.
 Enhancing quality – This concept deals with quality aspect and need to be accurate and in
standardised form. The data and financial report used needs to be reliable and have
important information related to reporting.
2. Importance of different accounting concepts in making financial statements

Accounting concept
Accounting concept refers to principles, rules and basic assumptions which worked as a
recording of transactions of business and preparation of accounts. Various accounting concepts
are accounting period concept, Business entity concept, matching concept, Accounting cost
concept, Money measurement concept, and Realisation concept (Arsalan-Werner, 2016).
Importance of Accounting concept
 Plays as a pivotal role in business affairs.
 Helps in preparation of financial statements.
 Evaluates financial strength and profitability of business entity.
 This also enable protection regarding future.
Money measurement concept
This concept stated that only monetary or financial transactions can be done in
accounting. Those business activities that could be expressed in financial terms will be recorded
as a transaction in accounting. Any other unrelated transaction will not be recorded.
Full disclosure concept
This concept is all about disclosure of relevant information in the statements of
accounting. External users like investors, customers, government are depended on businesses
statements of finance which impacts their decisions regarding investment.
Economic entity concept-
It is an accounting principle which says that, all the activities related with a business
should be recorded separately from the activities related with the owner of the business. A
company can be in different forms like partnership, government agency, sole proprietorship etc.
The economic entity concept also known as business entity concept (Diaz, 2017).
Going Concern Concept-
It says that, business will be continued for indefinite period. All the transactions of
company will be continued for foreseeable future. The financial statements of a company were
prepared on the basis of going concern concept to differentiate revenue expenditures from capital
expenditures.
Monetary Concept-

It says that, all the transactions of the business should be recorded in terms of money. It
contains all the quantitative transactions and ignore all the qualitative aspects of business.
Example – reputation of the firm.
Periodicity accrual concept
Periodicity accrual concept is that concept in which the accounting transactions are been
recorded in the period in which they actually occurred, rather than the period in which the cash
flow related to them occurred. It is a fundamental principle required for all the accounting
concepts. This principle supports various firms in recording revenue when the customer is
invoiced, rather when the consumer pays organization. It Records an expense when someone
incur it, rather than when an individual pay for it. Periodicity accrual concept Record the
estimated amount of bad debt when an organization invoice a customer, rather than when it
becomes apparent that the customer will not pay the firm (Amiram, and et.al 2018). This concept
also Record depreciation for a fixed asset over its useful life, rather than charging it to expense in
the period purchased. It is one of the most used and easiest concept in the accounting.
CONCLUSION
The report concluded importance of financial report in making decisions of management .
It showed importance of various concepts that are need to keep in mind while making financial
reports ans financial statements. The report concluded different assumptions of financial
reporting which includes quality and relevance of financial data. It depicted all the basic
concepts of accounting that are essential in carrying on the business and serves as the base of
financial accounting.

REFERENCES
Books and journal
Amiram, D., and et.al 2018. Financial reporting fraud and other forms of misconduct: a
multidisciplinary review of the literature. Review of Accounting Studies. 23(2). pp.732-783.
Arsalan-Werner, A., Sauerbier, M. and Mehling, I.M., 2016. Current concepts for the treatment
of acute scaphoid fractures. European Journal of Trauma and Emergency Surgery. 42(1). pp.3-
10.
Bushee, B.J., Goodman, T.H. and Sunder, S.V., 2018. Financial Reporting Quality, Investment
Horizon, and Institutional Investor Trading Strategies. The Accounting Review.
Diaz, J., Martin, G.W. and Thomas, W.B., 2017. Does Auditor Locality Matter in Financial
Reporting Quality?. Current Issues in Auditing.11(2). pp.P9-P14.
Henderson, S., and et.al.,., 2015. Issues in financial accounting. Pearson Higher Education AU.
Online
Objectives of financial reporting 2018. [Online]. Available through :
<https://www.iasplus.com/en/news/2018/03/cf>