Assignment on Financial Reporting - IFRS
Added on 2021-01-02
24 Pages4908 Words138 Views
Financial Reporting
Table of ContentsINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................11.Purpose of financial reporting.............................................................................................12.conceptual and regulatory framework of financial reporting and importance of qualitativecharacteristics for financial reporting.....................................................................................33.main stakeholders of organisation and their benefits form financial information...............54.value of financial reporting for meeting organisational objectives.....................................65.financial statements as per IAS-1........................................................................................76. Interpreting financial performance for Marks and Spencer (2017 and 2018)..................117.difference between International Accounting Standards and International FinancialReporting Standards.............................................................................................................138.benefits of IFRS.................................................................................................................149. Degree of compliance with IFRS across the world and factors which impact its compliance..............................................................................................................................................15CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................18
INTRODUCTIONFinancial reporting is the process by which company analysed their financial situationsand interpret that business information by preparing financial reporting. This financialinformation of the company will release to public and the users of the company. This presentreport will cover purpose of financial reporting and conceptual and regulatory framework offinancial reporting. Further, an explanation is provided of the stakeholders of the business andtheir benefits from financial information. Values of financial reporting for meeting goals of theorganisation is also discussed. Explanation of main financial statements as per IAS 1 anddifference between international accounting standards and international accounting standards isprovided in this report. Further, in this report benefits of IFRS with compliance of degrees withIFRS by organisations is to be discusses in this report. MAIN BODY1.Purpose of financial reportingMain purpose of financial reporting is to provide company's overall decision (Bushee,Goodman, Sunder, 2018). It also provides two primary decisions which includes decision-making process to managers and second it provides information about the financial health ofcompany to its stakeholders. It helps to develop effective decision making by concerningcompany's objectives and overall strategies. There are mainly five types of financial statementswhich prepared by companies and that include- Income statementBalance sheetStatements of cash flowStatements of change in equity Noted to financial statementsMain essentials of financial statements includes- assets, liabilities, equity, revenues, andexpenses. Each individual statement of financial reporting provides a different information touser of the company. Main purpose of financial reporting are as follows-1
It provides an overall financial position of the company- main purpose of financial reportingis to provide an accurate financial information of the entity. Mainly guidance is provided byaccounting boards to make financial statements which is IAS ans IFRS. These financialstatements help managers of the company to develop an effective decision by concerning reports.These mainly also helps users of the company by which they will able to judge overall financialposition of the company.It assists existing and potential investors- it helps investors in taking decision to their targetcompanies about whether to increase investment, or to withdraw that investment in the company(Naranjo, Saavedra and Verdi, 2018). For investors financial statements are the main source todecide the investment objectives in the company. It provides them information regardingfinancial stability of the company therefore both existing and potential investors of the companywill analyse financial statements regarding their investment decision.Provides prospects for future net cash inflows- financial reporting of the organisation not onlyprovide financial stability information of the company but it also predicts future prospects of thecompany. 2.conceptual and regulatory framework of financial reporting and importance of qualitativecharacteristics for financial reporting2
Conceptual framework to prepare financial reporting is the most important process for anorganisation which underlines a particular concept for the preparation and presentation offinancial statements. Framework of the financial reporting will address the objectives offinancial reporting, provides a qualitative characteristic which is useful financial information ofthe company, it also covers financial statements of the reporting entity, elements of financialstatements, recognition and measurement also addressed in framework of financial reporting.Regulatory framework of financial statements provides an effective procedure to preparefinancial reporting. Relevance- information which is relevant must be capable of developing decisions whichis helpful for users of the company (Conceptual Framework for Financial Reporting, 2018)Financial information is predictive when it provides information which is confirmatory andvaluable for company as well as for users.3Illustration 1: framework for financial reporting(source: Conceptual Framework for Financial Reporting,2018)
By regulatory framework company will able to provide faithful presentation to theirinvestors and public of business market. Preparation of financial statements are developed inaccordance with regulatory frame work provided by accounting standards boards so that itdevelop a faithful information on which it users can relayQualitative characteristic for useful financial informationQualitative information in financial reporting helps to identify the types of informationwhich is useful in developing decisions for the company. Qualitative characteristic is provided anequal information of financial reports of the organisation. Financial reporting will only beeffective when they represent faithful information in their statements. Therefore, there are mainlyfour fundamentals of qualitative characteristic which are as follows-Comparability- information which is provided by entity in their financial report will only beuseful when it compared to other entities with similar information. By developing comparabilityit enables users to develop understanding of similarity and make differences of items.Verifiability- financial report which is verifiable provides an information to users thatstatements presents a faithful information in the financial report (Qualitative Characteristics ofFinancial Information, 2013). Information which is provided in financial information must befree from material errors and it will not mislead the financial statements is the qualitativecharacteristic. These characteristic particularly provides relevant information which does notinfluence economic decisions of the users of the organisation.Timeliness- it means that information which is provided in financial statements are available intime and is capable to develop any decision in the company. Financial reporting must have toprepare in upgraded time because late submission of report will consider as less useful by theusers of the organisation.Understandability- according to this point financial report will provide effective classification,present report which is clearly understandable. This understandability means that informationprovided in financial reporting is clearly presenting accurate information and also providingaccurate supplied information which needed to assist in clarification.4
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