Financial Accounting and Reporting

FINANCIAL ACCOUNTING
AND REPORTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Objective of Financial Statements and its use to investors..........................................................1
Critical evaluation of of differences between regulatory system and impact over global
financial reporting requirements..................................................................................................2
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Financial accounting refers to specialised accounting branch keeping record of financial
transaction of company. Recording of transactions, summarizing and presentation in financial
reports or financial statements like balance sheet or incomes statement is done using
standardized guidelines. Financial accounting is essential for organisation to keep record of each
and every transactions that is entered into by the company. It helps companies to assess and
analyse the internal workings and operations. This enable them to change their policies and
strategies that are not supporting in the growth of company. For maintaining the uniformity
various rules and regulations including the guiding standards have been laid down by accounting
institutes (Hellman, Carenys and Moya Gutierrez, 2018). This essay will demonstrate the issue
regarding the increase of regulations for companies. They have to follow nation and international
standards for preparation of financial statements.
MAIN BODY
Objective of Financial Statements and its use to investors
Financial statements are prepared for representing the financial position of company and
it operations. Financial accounting is used for keeping track record of the financial transactions
incurred by the company. Financial statement are prepared and issued by company on regular
basis. Statement prepared by companies are considered as external as they prepared for reflecting
the position of company and how it is utilising its resources. They give important information to
stakeholders of company. Companies whose stocks are listed over the stock exchange, their
financial statements are circulated widely reaching to secondary recipients like customers,
competitors and employees(Becker, Daske and Pelger, 2018). It is not only prepared for
reporting the values of company but also for providing signifiant information to assess value of
company for themselves.
These financial statements of company are used by number of external parties therefore
they are prepared using the common standards known as accounting standards and Generally
accepted accounting principle. These standards are prepared for giving uniformity to the
financial statements of different companies. So that all the transaction of company are recorded
in uniform manner. This makes comparison of financial statements of companies simple and
easy.
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These standards and policies have to be followed for recording the accounting
information. Previously different countries were having their standards for recording the
transaction but with the invent of globalisation companies have expanded to other nations. This
expansion leads company to prepare reports as per the rules of company. Companies have to
prepared financial statements not only as per the national standards but also as per the
international standards mainly for companies that are operating at global level (Ramirez, 2015).
Financials are used by the investors for assessing the risk and return over their
investments. Using the financial statements investors analyse the performance of company
whether it is able to make effective utilisation of the available resources. This is done by using
various tools and techniques like ratio analysis that provides the investors descriptive
information about the internal working of company. Investors mainly analyse the profitability,
debt equity ratio, liquidity and return over equity. This enable the investor to make decisions
regarding whether the chosen company is adequate in meeting the requirement of investor. It
also protects investors against that are showing healthy position by manipulating the financial
figures.
Critical evaluation of of differences between regulatory system and impact over global financial
reporting requirements
Accounting Standards, accounting systems are the regulations and guidelines that the
governing body issues. They guide the company for the recording of the finances, presenting the
financial statements and the accounting of inventories, amortization and depreciation. Manner in
which these are reported by corporations have large impact over numbers appearing in the
financial statements & regulatory filings. Financial analysts and investors should be aware of the
standards used by company so that they can analyse the effects on financial ratios if different
accounting systems were followed. Guidelines and standards differ by regions or may be
company specific. IFRS is global cluster of standard which is being adopted widely across the
globe.
IFRS refers to International Financial Reporting Standard, and is set by International
Accounting Standards Board, London. IFRS were formed in 1973. Accounting bodies of
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