The Context and Purpose of Financial Reporting (pdf)
Added on -2020-12-09
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FINANCIAL REPORTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................11. Analysing the context and purpose of financial reporting......................................................12. Examining regulatory and conceptual framework and governance of financial reportingwith key principals for assessing requirement and purpose........................................................23. Identifying key stakeholders of organization and critically assessing need for financialreports..........................................................................................................................................44. Analysing value of financial reporting for accomplishing the organizational growth andobjectives....................................................................................................................................55. Explaining International Accounting Standards (IAS) and International Financial ReportingStandards with evaluation of benefits.........................................................................................66. Critical evaluation of financial reporting in an organization via application of theories and.7models to support judgements and conclusions.........................................................................77. Determining variations in financial reporting across the world and evaluate the factors thatinfluences..................................................................................................................................10the differences..........................................................................................................................108. Evaluating degrees of compliance with IFRS by different originations across the world....10CONCLUSION..............................................................................................................................12REFERENCES..............................................................................................................................13
INTRODUCTIONFinancial reporting is replicated as disclosure of financial statements to multiplestakeholders such as customers, regulators, investors related to performance of organization overspecified duration. The present report will analyse the purpose and context of financial reportingand its conceptual and regulatory framework will be examined. In the same series, it will assessits governance along with key principles, purpose and requirement. It will determine keystakeholders of organization with their critical assessment of requirement for financial reports.Moreover, it would analyse the important of financial reporting for attaining organizationalobjectives and growth. In this aspect, it will provide explanation of International accountingstandards and International financial reporting standards and with evaluation of their benefits.This report will provide critical evaluation of financial reporting in organization with applicationof different theories and models for purpose of supporting conclusions and judgements.Furthermore, it will determine differences in financial reporting throughout world with factorsfor impact these variations. Lastly, this will evaluate degrees of compliance with IFRS throughvarious organizations throughout the world.1. Analysing the context and purpose of financial reportingFinancial reporting is very vital in the world economies as its initial objective is to giverelevant and useful information to company;s owners where is division among control andownership of particular company. Generally, it occurs mainly in public limited organizationswhere share capital is sold to public via stock market or exchange system. Moreover, the diverseand potentially geographically dispersed shareholders does not involve in management ofcompanies as directors are appointed on their behalf (Financial reporting and corporategovernance, 2018). In the same series, owners attain a yearly statement which briefs positionsand performance of organization so that they could asses about performance of investmentduring reporting period. With absence of reporting system, investors would be less inclined tocontribute as capital as they would have no mode to trace or monitor effectiveness of company isbeing operated through directors, appointed stewards of firm who are directly supposed to workin shareholders best interests.In the similar aspect, for accomplishing needs of users of financial statementsorganizations have to implement the accounting system that offers the required information. It isalso significant that system is regulated for purpose of ensuring information offered to users in1
proper format. It is very useful with context to requirements of information as this is attained viaframework of financial reporting with basis of conceptual framework. The purpose of financialreporting is to give information related to financial position, changes and performance infinancial position of business which is very useful for broad range of users for undertakingeconomic decisions (Dou, Wong and Xin, 2019). It provides information to organization'smanagement which is used with reference to analysis, decision making, benchmarking andplanning. This helps to provide information to promoters, investors, debt provider and creditorsenables to make prudent and rationale decisions on basis of credit and investment.It helps in giving information to public and shareholders at large with context to differentlisted companies related to multiple aspects of business unit. This provides information related toeconomic resources and claims liabilities and owner;s equity and method that how resources andclaims have undergone with alterations over specified duration. Simultaneously, this offersinformation about procurement of organization and implicating multiple resources. Theinformation related to performance management has been provided to multiple stakeholders ofbusiness and how ethically and diligently they discharge fiduciary responsibilities and duties. Inthe similar aspect, it provides information to various statutory auditors which directly facilitatesaudit and enhance social welfare by observing into employee interest, trade union andgovernment.2. Examining regulatory and conceptual framework and governance of financial reporting withkey principals for assessing requirement and purposeThe conceptual framework is coherent system of fundamental principles and interrelatedobjectives. This prescribes nature, limits and function of financial accounting and statements as italso helps in assisting IASB and to develop standards of IFRS which are on basis of concept ofconsistencies (Conceptual Framework for Financial Reporting, 2018). This assists preparerswith context of developing the accounting policies for particular events or transactions where nostandard applies for standard which allows to select the accounting policy. This helps every otherparty with context to interpret and understand the standards. In the present era, it also containscomprehensive set of concepts and making some major alterations to past version, further, thiscomprises guidance of measurement, reporting entity, de recognition, presentation anddisclosure. In simple words, it set concepts which underlie in presentation and preparation offinancial statements to different external users. The relationship among individual IFRS and2
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