Financial Reporting Context and Purpose
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Added on 2020-10-05
Financial Reporting Context and Purpose
Added on 2020-10-05
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FINANCIAL REPORTING
Table of ContentsINTRODUCTION...........................................................................................................................3MAIN BODY ..................................................................................................................................31. Context and purpose of financial reporting..............................................................................32. The conceptual and regulatory framework of financial reporting and its qualitativecharacteristics...............................................................................................................................43. The main stakeholders of an organization and benefits of financial information to them ......64. Value of financial reporting for meeting organizational objectives and growth ...................75. Main financial statements as per IAS 1....................................................................................86. Two years financial statements of marks and Spencer..........................................................117. Difference between international accounting standard (IAS) and International Financialreporting standards (IFRS).........................................................................................................138. Benefits of IFRS.....................................................................................................................149. Identifying the varying degree of compliance with IFRS by organization across the world ....................................................................................................................................................15CONCLUSION .............................................................................................................................16REFERENCES..............................................................................................................................17
INTRODUCTIONFinancial reporting is a process through which financial information is presented in thestatements. It helps in providing information to stakeholders about the performance and positionof firm. Financial reporting includes profit and loss statement, balance sheet and cash flowstatement. This assignment will include context and purpose of financial reporting. Furthermore,it will examine the conceptual and regulatory framework of financial reporting and its qualitativecharacteristics that makes the financial information more reliable. Also, it will provide mainstakeholders of organization and benefit to them by financial information. Moreover, it willprovide importance of financial reporting. Also, it will contain information about the financialstatement of the organization to identify its performance. This assignment will consistdifference between international accounting standard and international financial reportingstandards.MAIN BODY 1. Context and purpose of financial reporting.Financial reporting includes disclosure of financial information to management toprovide them information about the performance of organization to make effective decision toimprove the performance of firm. Financial reporting is used for the serving two purposes. first,it helps management in effective decision making which helps the organization in performingeffectively and efficiently in the industry to increase its profitability (Chen and et.al., 2016). Itprovides information to management about the strength and weakness of company to makestrategies and planning to reduce the weaknesses to improve performance of firm. Second,financial reporting provides information to the stakeholders of company about the financialhealth and activities of the firm. This information provides assistance to stakeholders to make their decision about theinvestment to be done in the organization. Also helps the stakeholder to compare the firmperformance with that of other to identify its growth in the industry (Nobes, 2014). It providesassistance to management by providing them relevant and useful information. Financial reportingincludes profit and loss accounting, balance sheet and cash flows statements.
Profit and loss accounts are prepared to provide information about the net profit and lossfor the company. This statement provides the information about performance of the organizationby operating its various activities (financial reporting, 2016). Balance sheet is prepared in whichassets and liabilities of the firm are provided on the basis of which the position of theorganization is determined at a particular point of time. Cash flow statement under the financialreporting provide information about cash inflow and outflow for the period on the basis of whichcash requirement of the company are determined to maintain the cash requirement forperforming various future activities of the company. Financial reporting support in preparing budget for the future activities to perform the variousactivities according to budget to get the profitability derived according to budget. Financialreporting is used for various purposes which include decision making, information tostakeholders, to identify the profitability and performance, determining the cash requirement etc.2. The conceptual and regulatory framework of financial reporting and its qualitativecharacteristicsThe conceptual framework of financial reporting is based on objective of general purposeof financial reporting and it also provides various qualitative characteristics on the basis of whichfinancial reporting are prepared. It set out the definition of assets , liabilities , equity, incomesand expenses. The conceptual framework include the criteria for including assets and liabilitiesand various measurement bases for them. It provides the concepts and guidance for presentationand disclosure and also provide concepts relating to capital and capital maintenance. Financial reporting are governed according to the standards set by internationalaccounting standard board. According to the set standards the main objective 0fn financialreporting is to provide financial information to the stakeholders to make their decisions aboutcompany growth. Financial reports are prepared according to the set standards to provide usefuland relevant information to various stakeholders of the organization. This information helpsthem in determining the performance and position of the firm in the market. Regulatoryframework for financial reporting is different for different organization such as sole proprietor,partnership and company.
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