Purpose of Financial Reporting (Doc)
Added on -2020-07-23
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FINANCIAL REPORTING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11. Purpose of financial reporting............................................................................................12. Conceptual and regulatory framework of financial reporting and qualitative characteristicsof financial information..........................................................................................................33. Discuss different types of stakeholders..............................................................................54. Value of financial reporting to company ...........................................................................65. Presentation of financial statements...................................................................................76. Financial ratios and interpretations....................................................................................87. Distinguish between IAS and IFRS....................................................................................98. Discussing benefits of IFRS.............................................................................................109. Varying degrees of compliance of IFRS by the companies in the world.........................11CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12
INTRODUCTIONThe information regarding financial statements are required to be presented in a waywhich is then is assessed by users of financial information. This is achieved by preparingfinancial reports by the company. The enclosed report deals with importance of financialreporting which has great importance in business world and overcoming international scandalsquite effectively. Financial reporting is helpful for management and that to external users such asinvestors, lenders that directly provide funds to organisation for effective functioning. Suchstakeholders’ take the economic decisions quite effectually. This is essential so that transparencyof financial position of the company is reflected in the best possible way. TASK 11. Purpose of financial reportingThe purpose of financial reporting is to prepare reports of the organisation so that it maybe able to keep perfect record of each and every transactions and activities taking place in theorganisation. This is however, not an easy task but require efficient accountants so that properreports may be prepared. Financial reporting tells business whether it is making profit or loss inthe current period in the best possible and productive way (Ge, Li and McVay, 2017).Another purpose of preparing financial reporting is to provide financial performance othe company to its stakeholders be it investors or shareholders. This is essential as lenders andinventor’s keep eye on company that whether firm is using resources provided to it wisely or not.If not then company loses it valuable investors. As such, financial reporting is required to befurnished to them so that performance may be evaluated nicely. Moreover, company shouldperform well so that profits are made in large quantum with much ease by utilising scarceresources. The scandals going internationally is a major issue in the current scenario. Thus, financialreporting is important tool so that organisation may be able to provide fair financial reports tostakeholders and as such, transparency and clarity is maintained effectively by firm (Cohen,Krishnamoorthy and Wright, 2017). Moreover, perfect records of daily activities are listed infinancial reports. It has also section of liabilities and assets described in it, which is important to1
stakeholders whether they are external or internal. It is also reported in that how business is usingcapital and how profits are being generated by it. Furthermore, financial report also prepared for the purpose of providing information tothe stakeholders that capital is in adequate manner and whether company can lead to futuregrowth with much ease. In simple words, it is also listed that capital is sufficient or not forcarrying out future activities in the best possible way. Moreover, financial reporting providesmuch needed information to lenders and investors and as such, firm’s value is created nicely andas a result, clarity is being observed (Bonsall, S. B. and et.al, 2017). Financial reporting consists of financial statement such as balance sheet, cash flowstatement, income statement, changes in shareholder’s' equity. It also contains notes to accountsor workings represents information entered in financial statements. Annual reports are alsofurnished in it effectively. This is done with a purpose to give clarity of financial strength ofcompany and financial health of it easily. Apart from providing information to stakeholders, italso provides same to statutory auditors which is essential so that true and fairness of financialstatements may be ascertained with much ease. The information regarding economic resources used in the organisation for itsfunctionality is also provided and where money is spent is also provided to shareholders. Thismeans that complete record of financial performance of firm is being listed in financial reportingand as such, users of such information are quite benefited effectually. Moreover, auditors arealso benefited, as it is require by them to test the accuracy of financial statements. Taxationauthorities also require this so that company may pay tax wisely. The financial reporting also isused for the purpose of bidding and labour contract and for government supplies as well.Financial reporting helps firm to abide by various rules and laws, which are required bygovernment so that business is carried out in fair manner and is not detrimental in the publicinterest. For this, organisation is required to file financial statements to ROC (Registrar ofCompanies) for legal purpose. As such, it is also required for legal purpose as well. Moreover, itis also essential for financial analysis, benchmarking, and financial planning as well. Moreover,decision making is also achieved by it effectively (Johnston and Petacchi, 2017). It is also usedfor the purpose to raise capital from domestic or locally and also tat from international as well.This helps organisation to have much capital from domestic and overseas so that it may be able2
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