Financial Reporting and Analysis: Framework, Purpose, Interpretation, and Ratio Calculation

13

TABLE OF CONTENT
.........................................................................................................................................................3
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
P1 Analysing the financial reporting including framework and governance of regulatory
reporting:......................................................................................................................................3
M1 The purpose of financial reporting and expectations of stakeholder:...................................4
D1 Critical analysis of various regulatory frameworks for stakeholder:.....................................5
P2 analysing the purpose of financial reporting in the organizations:.........................................6
P3 interpretation of profit and loss, cash flow and balance sheet and other statements:.............7
P4 Calculation of financial ratio for better performance and investment:..................................9
P5 benefits of international accounting standards and international financial reporting
standards:...................................................................................................................................11
P6 evaluation of financial reporting and auditing model:..........................................................12
Uniformity in financial accounting standard:............................................................................13
M3 Critical evaluation of financial reporting and auditing through theories support judgement
and conclusion:..........................................................................................................................14
P7 difference and importance of financial reporting in different countries:..............................14
M4 Critical evaluation factors that influence the financial reporting in the international:........14
CONCLUSION..............................................................................................................................15
REFERENCES................................................................................................................................1

INTRODUCTION
Financial reporting refers standard accounting practice in which companies use financial
statements in order to show its financial performance. It helps investors in making investment
related decision. This present study is going to discuss effectiveness or reasons of financial
reporting as how it can help companies in analysing its performance. Further, it will discuss
financial reporting standards that companies need to follow and ways in which it protects them
against poor decision (Aifuwa and Embele, 2019). It will also discuss some international
differences in financial reporting and some common ratios that are being calculated by
companies for knowing their actual financial performance. International accounting standards as
well as financial reporting standards also plays a vital role as it support judgement to businesses.
Different countries have different financial reporting standards that companies of that country
need to follow for protecting against lawsuit and measuring performance.
MAIN BODY
P1 Analysing the financial reporting including framework and governance of regulatory
reporting:
Financial reporting means the details and information of finance in the company,
reporting is done to analyse the financial position and present the report in front of the
stakeholders of the company (Acharya and Ryan, 2016). This reporting is very important for the
company as this provide the notes and quarterly and annual reports, the stakeholders of the
company carefully look at these financial data. Financial reporting include two major elements
such as:
Regulatory framework: The Financial Reporting Council (FRC) regulate the UK based firms
and promote their transparency in business world. The regulatory frameworks include the
auditors, accounting and set of various government corporation. Many business like Deloitte
provide prepare financial reporting for their clients with the help of FRC.
Governance: for investors it is very important to trust the company according to the strength and
financial reporting statement of the company, governance here is not referred the interference of
the government but it is concern with the detailed accounting and financial progress of the

company. Governance of financial reporting help business to improve the position in the
financial market and efficiency of the company. Legal regulation and standard of UK FRS 102
highlights the simplified accounting report for the business.
Benefit and drawback of IFRS:
There are certain benefits and drawback of IFRS such as:
Single purpose: IFRS is international accounting standards which a business organization can
adopt this benefit and can manager multiple accounts with one same accounting standard around
the world.
Reduce affords: the biggest and one of the most beneficial thing of using IFRS is, this help a
business organization to reduce cost, time and affords because this accounting standard follow
single set rather than multiple accounting standard which consumer more time affords and cost.
Limitation:
High cost: IFRS may be beneficial for large scale business organization but this is costly for
small scale businesses, if there is any changes in the accounting standards than these small
business have to bear such impact which will cost them high to make changes.
Manipulation: IFRS may create various benefits for the business organization but this also have
some limitation, this accounting standard can create manipulation in the surplus profit of the
company which sometime lead to fraudulent case.
Company Act 2006
Company Act 2006 of UK highlight the legal and governance guidelines to the company to trade
fairly within the country, this Act help company to modernize and simplify their business
process under such Law. Company Act is primary source of UK legislation that favour all type
of companies of UK.
M1 The purpose of financial reporting and expectations of stakeholder:
Financial reporting have only one main purpose which is to provide financial details of
the company (Aifuwa and Embele, 2019). Financial data, later this can be used to know the
financial position and performance of the company. Stakeholder of the company take this report
into consideration to:
Provide information and details to management team which later analyse and make
decision accordingly (Albu, Albu and Gray, 2020). Stakeholder and management team critically
examine the income and expenditure of the company with the help of financial reporting.