Conceptual and Regulatory Framework
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Added on 2020-12-29
Conceptual and Regulatory Framework
Added on 2020-12-29
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FINANCIAL REPORTING
INTRODUCTIONFinancial reporting is preparation of various statements and reports for disclosingfinancial information which assist in identifying the performance and position of the organizationfor a period. Marks and Spencer will be included in this assignment for interpreting the financialperformance on the basis of financial statements. This study will include the conceptual andregulatory framework and qualitative characteristics required for making the financialinformation more reliable. Furthermore, it will include main stakeholders of the organizationwhich are provided with financial reports. Moreover, this assignment will examine the value offinancial reporting for achieving the organizational objectives. Also, this study will provide withfinancial statements which are required as per IAS 1. It will include financial ratios fororganization performance and investment. This study will assist in differentiating betweenInternational accounting standards and international financial reporting standards.MAIN BODY1. Context and purpose of financial reportingFinancial reporting is related to presentation of various reports and statements for thepurpose of providing financial information to the stakeholders of the organization. Financialreporting shows the performance of the enterprise and its position. Financial reporting areprepared for mainly two purpose which include providing information to the management foreffective decision – making to improve the enterprise performance (Kaya and Koch, 2015).Another purpose of preparing financial reporting is to provide information to the externalstakeholders to provide them understanding of company's liquidity position. Financial reporting helps ion providing information to customers, investors, suppliers,government etc (Rajgopal, 2015). Financial reporting include profit and loss account, balancesheet and cash flow statement. Profit and loss statement helps the firm in identify its performancefor the period by identifying the net profit or loss. Profit and loss statement include expenses andincome for a period. Balance sheet helps in identifying the position of company on the basis ofassets and liabilities. Cash flow statement under financial reporting helps in finding out cashinflows and outflows for the period. This reporting is necessary for the organization for disclosure of its financial informationto have record of its various transaction to pay the tax to the government (Leuz and Wysocki,1
016). Financial reporting is mandatory for the company to prepare to provide information togovernment for paying tax.2. Conceptual and regulatory framework and qualitative characteristics that makes the financialinformation reliableThe conceptual and regulatory framework of financial reporting defines various laws andstandards on the basis of which financial statements are prepared(Francis and et.al., 2015).Financial reporting is governed by standards of regulatory framework such as IAS and IFRS.Financial reporting is prepared by the framework provided by international accounting standardboard(IAS) in which standards were issued by IAS committee (Holland, 2015). Internationalfinancial reporting standards which provide framework for preparing financial statements on thebasis of standards set by International financial reporting standards board.Qualitative characteristics which makes the financial information reliable consist of : Relevance : It involves that the accounting information contained in the financialstatements must pertain to specific time period and also provide relevant information ofthe financial transaction which assist in decision – making (Frias‐Aceituno, Rodríguez‐Ariza and Garcia‐Sánchez, 2014). Reliability : The financial information must be reliable in order to provide understandingfor decision making and the information contained must be reliable and based on facts(Ge and et.al., 2018). It provides that information provide in financial report must assistusers in decision making on the basis of those reports to identify financial position ofbusiness.Comparability : The information disclosed in the financial statements must becomparable with other company's to make choices which will helps in improvingperformance and also asst in identifying company's performance by comparing it withother organization (Robson, Young and Power, 2017).Consistency : The financial information to be more reliable must be presentedconsistently from year to year. 3. The main stakeholders of an organization and benefits to them of financial informationThe main stakeholders of the company consist of internal and external . The followingare the various stakeholders which are provided with the financial reports to provide themvarious financial information.2
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