Report on Conceptual and Regulatory Framework of Financial Reporting
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Added on 2020-06-06
Report on Conceptual and Regulatory Framework of Financial Reporting
Added on 2020-06-06
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FINANCIAL REPORTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1Conceptual and regulatory framework of financial reporting.....................................................1Stakeholder and the importance of financial information to stakeholders..................................3Importance of financial reports to the organisation....................................................................5Income Statement........................................................................................................................7Statement of changes in shareholders equity..............................................................................8Balance sheet...............................................................................................................................8Interpretation of financial performance......................................................................................9Difference between IAS and IFRS............................................................................................11Advantages of IFRS..................................................................................................................12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................15
INTRODUCTIONFinancial reporting is an essential part of any organisation whether it is from serviceindustry or manufacturing industry. Financial reporting is the process of preparing statementsthat are used to disclose the financial status of any organisation to its internal as well as externalusers. The basic reports of financial reporting are statement of financial position, statement ofprofit and loss(also known as income statement), shareholders equity statement and statement ofcash flow. All the listed companies are subjected to preparation of these financial statements forall their financial years. For the preparation of financial reports, various boards have issued thestandards like International Accounting standards, International Financial Reporting system andGenerally Accepted Accounting Standards. These reports provide the useful information to itsusers which are then able to make economic decisions.The present report will throw some light on conceptual and regulatory framework,qualitative characteristics and objectives of financial reporting. This report will also show theimportance of financial information to the stake holders of any organisation. The report clearlyidentifies internal and external stakeholders of any organisation. In the present report, financialstatements including balance sheet, income statement and statement of changes in equity hasbeen prepared for Rita plc. And the interpretation of its financial statements has also beenprovided. The present report also provides the interpretation of the financial performance ofSainsbury that is UK based supermarket chain, has been provided. This also includes thedifference between International Financial Reporting System and International AccountingStandards and the benefits of IFRS.Conceptual and regulatory framework of financial reportingConceptual and regulatory framework of financial reporting has been provided to definethe purpose and nature of accounting. It must consider the conceptual issues and theoreticalissues surrounded the financial reporting. In accordance to the financial reporting, conceptualframework can be referred as a Statement of Generally Accepted Accounting Principles(GAAP).1
Conceptual framework provides the theoretical basis as how the financial information is to bepresented and communicated to the users (Conceptual Framework for Financial Reporting,2017).To provide useful information related to economic decisions to its users is the mainmotive of financial reporting. The regulatory framework of IFRS addresses the following:The objectives of financial reporting:The primary users of the information of financial reporting are investors, lenders andcreditors. The information is used to take some decisions regarding selling, buying orholding equity or debt instruments.The information is also used by the primary users to not only assess the future net cashinflow of the entity but to also identify the responsibility of the management towards theeffective and efficient utilisation of entity's existing resources.Reporting Entity:The reporting entity is an entity where the users exist who depend on the information offinancial statement to make economic decisions.An entity to be a reporting entity need not to be a legal entity. It could be a part of anentity. A parent entity having subsidiary entities should present its financial statements inconsolidated form.Useful Financial Information and its Qualitative features:This includes the type of financial information that could be the most useful informationto the users for taking their decisions (Ahmed, Neel and Wang, 2013). The decisions are basedon the reporting entity and the information of its financial reports. Financial information shouldcontain following qualitative features:Relevance:The information presented in the financial reports must be relevant to thereporting entity. A financial information to be relevant must contain predictive value,confirmatory value or both, these values are capable to make a difference in the decisionsof users.2
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