Financial Reporting - GAAP and IFRS
Added on 2021-02-20
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Financial reporting
Table of ContentsINTRODUCTION...........................................................................................................................11. Purpose of financial reporting.................................................................................................12. Accounting principles and their purpose.................................................................................23. How stakeholders of company benefit from financial information........................................34. Benefits of financial reporting in meeting organisation goals................................................45. Presentation of Financial statements.......................................................................................66. Interpretation and Analysis of Hilton Ltd...............................................................................87. Difference between International Accounting Standards (IAS) and International FinancialReporting Standards (IFRS)......................................................................................................108. Benefits of IFRS....................................................................................................................119. Compliances with IFRS and factors which impact on these compliances............................12CONCLSUION..............................................................................................................................13REFERENCES .............................................................................................................................14
INTRODUCTIONFinancial reporting is very important aspect in determining the financial position ofbusiness (Leuz and Wysocki, 2016). Financial information is beneficial for external shareholdersand management of the company so that they have a clear idea where to invest. Generally GAAPand IFRS standards are used to prepare financial statements. Present report is based on Deloittewho is audit, consultancy and tax service company. It is a private company. Report will containthe purpose of financial reporting, purpose of accounting principles and how shareholdersbenefits from financial information. Study will further cover the difference between IAS andIFRS, how financial information is useful in reaching company goals and objectives, benefits ofIFRS. Lastly report will contain cash flows, profit and loss statements and factors which impactcompliance in the nation. 1. Purpose of financial reportingFinancial reporting: Financial report of a company reveal the finance related information to externalshareholders (e.g. governments, customers, investors etc.) and management to check theperformance of the company over a period of time (Flower, 2018). Financial reports are usuallymaintained or issued on quarterly basis or annual basis. Public and private company performtheir financial report with GAPP (generally accepted accounting guidelines). While companiesworking in international markets perform their financial report with IFRS (international financialreporting standards). These standards provide the guideline under which financial report isprepared. Financial reports of Deloitte include the following :Balance sheet, which shows the assets, liabilities and equities of company. Income statement, which shows the income earned and expense incurred of the company.Statement of preserved earnings, which shows changes made by the company in itsequity. Cash flows, which shows the cash related activities which includes financing, investingand operating activity (Williams and Dobelman, 2017). The main purpose of preparing financial reports are as follows:Provides company's financial information:The purpose of making financial statement isto provide information to its shareholders and management about the performance andhow much potential a company has. If company uses IFRS then they need to provide 51
statements. a) balance sheet b) profit and loss statement c) cash flow d) change in equitye) notes of financial statement. Assist potential investors:It is beneficial for investors to obtain information of targetcompanies from financial reports so that they can use this information to makeinvestment decision like withdraw the old investment or invest more in existinginvestment. This information is beneficial for both old and new investors to analyse andcrack-up the investment decision (Acharya and Ryan, 2016). Investors can evaluate thecompany's profitability against competitors and their return on investment. Investors alsohave an idea that company is using its resources efficiently. Overview of future cash flow: The purpose of this report is to not only give informationabout how good or bad a company's position is but it is also used to determine the futurecash flows. It is beneficial for employees of the company to measure the stability so thattheir job is secured. It evaluate the actual cash flow in determining future cash flows andprofitability (Flower, 2018). 2. Accounting principles and their purposeAccounting principles: It is basic guidelines or rules that companies follow in preparing financial reports.Accounting principles are different in every country (Tschopp and Huefner, 2015). Investorsneed to be cautious while comparing companies because accounting principles differ fromcountry to country. There are some principles that rule the accounting are:Full disclosure principle: This principle states that it is very important to disclose all theinformation related to financial statement so that potential of company can be identified.It is required to disclose every detail in the statements. The purpose of this principle is toprovide all the essential information to the people who want to invest in the company. Itis beneficial for Deloitte to disclose its information to build its goodwill (Acharya andRyan, 2016). Going concern principle: This principles states that the company will exist for longerperiod and continue its business to earn objectives and fulfil its commitments. Companywill not liquidate in future if its sales are low. The purpose of this principle is to show thestability of company to the shareholders which impact the price of stock (Abbott and2
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