Financial Reporting: Conceptual Framework

Financial
Reporting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Context and purpose of financial reporting.............................................................................1
2. Conceptual and regulatory framework with qualitative characteristics of financial
information...................................................................................................................................2
3. Main key stakeholders of an organisation and the way in which they get benefited from
financial information....................................................................................................................3
4. Value of financial reporting for meeting organisational objectives and growth.....................4
5. Preparation of different financial statements...........................................................................5
6. Use of financial statements for interpreting and communicating financial performance of
organisation..................................................................................................................................8
7. Difference between IAS and IFRS........................................................................................11
8. Different benefits of IFRS.....................................................................................................11
9. Varying degrees of compliance with IFRS............................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Financial reporting can be defined as the process which is followed by business entities to
record all the financial data in the books of accounting. Main purpose of it is to determine actual
position of the company within the market so that appropriate information regarding it could be
rendered to internal and external stakeholders (Albring, Elder and Xu, 2018). With the help of it
accounting professional and managers can formulate strategies decisions for future so that
performance of business could be enhanced. The organisation which is selected for this report is
BT Group Plc which is British Multinational Telecommunication enterprise. It is mainly
established in London, United Kingdom and founded in year 1969. This assignment covers
various topics such as context and purpose of financial reporting, the way in which it helps to
meet organisational objectives and growth, conceptual and regulatory framework, main
stakeholders etc. Along with this, interpretation and communication of financial performance,
different between IAS and IFRS, benefits of IFRS and varying degrees of compliance are also
covered under this project.
MAIN BODY
1. Context and purpose of financial reporting
Context of financial reporting: The process which is used by business entities to
communicate business information with all the internal and external stakeholders is known as
financial reporting. For all the organisations such as BT Group Plc it is very important to conduct
it on yearly basis so that large number of investors could be attracted and long term objectives
could be achieved. It also guides managers and other top executives to determine that the efforts
which were made by them for betterment of business. If companies are not able to form final
accounts appropriately then it may leave negative impact upon the activities which are performed
for business execution.
In order to reach the objective of profit maximisation, customer satisfaction and attracting
investors it is very important for BT Group Plc to make sure that financial reporting is conducted
on yearly basis (Chen and Gavious, 2017). With the help of it actual status of business could be
determined which helps to reach business goals. Different types of statements such as income
statement, balance sheet and cash flow statement. With the help of them stakeholders such as
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shareholders, investors, suppliers and creditors determine that organisation is financially strong
or not to formulate decision regarding investing money or providing credit to the company.
Purpose of financial reporting: For all the business enterprises it is vital to formulate
financial statements every year so that long term business goals could be achieved. Main
purposes of financial reporting is as follows:
 Purpose of it is to provide data regarding results of operational activities which were
performed during the years to execute business in systematic manner.
 Another purpose of financial reporting is to provide detailed information to stakeholders
so that their interest within the organisation could be enhanced.
2. Conceptual and regulatory framework with qualitative characteristics of financial information
Conceptual Framework: According to conceptual framework for all the organisations
whether these are small or large it is very important to formulate final accounts according to
specific concepts and principles. If all of them are not followed by companies then their financial
statements are not considered accurate. Some of the major concepts which are required to be
followed by BT Group Plc while forming final accounts are discussed below: Going concern concept: It is also known as fundamental principle of accounting which
demonstrates that a company will continue all its plans and operations during current and
net financial years. It is vital for BT Group Plc to follow it so that stakeholders can
analyse that all the existing assets will be used by enterprise to meet all its fiscal
obligations (Going concern concept, 2019).
 Monetary unit concept: It states that the transactions which are recorded in the books of
accounts must have taken place in monetary terms. If it is not possible to measure them
then such entries should be ignored by accounting professionals of companies such as BT
Group Plc.
Regulatory framework: The regulatory framework of financial reporting is connected
with execution of accounting rules, regulation and standards so that prepared financial statements
can become optimistic and transparent for users (Chen and et.al, 2018). In the context of BT
group plc their accountants use below mentioned accounting principles that are as follows: Full Disclosure – The particular principal of financial accounting important for
accountant to utilise of all types of financial information regarding to business in produce
of financial reports. This concept defines that company should not hide any essential
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