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Importance of Financial Reporting for Meeting Organization

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Added on  2020-06-03

Importance of Financial Reporting for Meeting Organization

   Added on 2020-06-03

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FINANCIAL REPORTING
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TABLE OF CONTENTINTRODUCTION.......................................................................................................................................3(1)Context and purpose of financial reporting.........................................................................................3(2) Conceptual and regulatory framework requirement, purpose and key principles...............................4(3) Major stakeholder of organization and benefits they derive from financial information....................6(4)Importance of financial reporting for meeting organization objectives and growth............................7(5)Financial statements of companies and difference between cash flow statement, income statement and balance sheet.....................................................................................................................................8(6) Way in which financial statements are use to interpret and communicate financial performance....12(7)Difference between IAS and IFRS....................................................................................................13(8) Evaluate benefits of IFRS................................................................................................................13(9) Degree to which organizations are complying with IFRS and factors in nation that may impact compliance............................................................................................................................................13CONCLUSION.........................................................................................................................................14REFERENCES..........................................................................................................................................15
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INTRODUCTIONFinancial reporting is the one of the major topic on which lots of discussions are carriedout on varied forums. In the present research study deep discussion is carried out on financialreporting. Report is classified in to varied parts that cover topics and discussion related tofinancial reporting, regulatory framework requirements and stakeholders. Apart from this, detaildiscussion is carried out on financial statements of companies like income statement, balancesheet and cash flow statement. In the report comparison is done between these financialstatements and difference between them is explained in detail. Ratio analysis of Tesco is done inorder to reflect way in which financial results are reported in corporate sectors in order to assistmangers in making business decisions. Apart from financial reporting IFRS and IAS are alsoconsidered one of the most important topics. Inn present research study IFRS and IAS arecompared with each other and benefits of IFRS are explained. Factors due to which IFRS doesnot implement in nations in systematic manner is also discussed in detail at end of the report. Itcan be said that vast amount of things are discussed in detail in present research study. (1)Context and purpose of financial reportingFinancial reporting refers to the practice under which financial statements are produced inorder to disclose company financial performance. Preparation of income statement and balancesheet are one of best examples of financial reporting. There are number of purpose of financialreporting and maintaining a very close eye on business is one of them. Usually, business isaffected by number of factors like business environment and other factors. It is impossible formanagers to estimate likely impact that these factors have on business firm cash flows. Thus,due to this reason financial reporting is necessary (Council, 2010). Under this varied techniquesare used like cash flow statement where cash flows are segregate in different categories like cashflow from operations, financial and investment activities. Different statements that are preparedunder financial reporting and purpose behind their preparation is explained below.Income statement: It is one of the most important statements that is prepared by thebusiness firms. Reason for preparing income statement is to identify profit or loss that isgained by the business firm. Other main purpose of financial reporting is to identifytrends that are going on in terms of making expenditure in the business. Income statement
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is the one of the important component of financial reporting method. In the annual reportdifferent annexure are prepared and under this detail calculations are revealed that areused to compute final values of variables that are in balance sheet (Beyer and et.al.,2010). It can be said that income statement is the one of the most important statement thatis prepared by the business firms. Balance sheet: Balance sheet is the one of the important statement that is prepared byevery type of firm irrespective of their size whether it is small, medium or big in size.Balance sheet reflects financial position of company and it is one of the most importantelements of financial reporting. Reporting and identification of financial health of firm isthe one of the main purpose behind preparing balance sheet. In corporate reportingusually many ratios are computed by using information that is provided in the balancesheet. On this basis financial condition of the firm is measured.Cash flow statement: Cash flow statement is usually prepared by large size businessfirms in order to identify cash flow from operations, investing and financing activity. It isvery hard task to estimate likely cash flow that is happened from these different sorts ofactivities. Main purpose of preparing cash flow statement in financial reporting is tocommunicate managers net cash balance that remain after adjusting cash flows fromdifferent sort of activities (Li, 2010). It can be said that cash flow statement is one of themain statement that is integral part of financial reporting. It can be said that there are lotsof benefits of financial reporting for the business firms. It helps managers in makingprudent decisions for benefit of an organization.(2) Conceptual and regulatory framework requirement, purpose and key principlesConceptual framework refers to basic concepts that are used for preparation andpresentation of financial statements. In other words it can be said that under conceptualframework there are some concepts that are strictly followed for preparing financial reports.Main purpose behind preparing such kind of conceptual framework is to ensure that there arecertain concepts that will be followed by the business firms to report their results in systematicmanner. It can be said that this ensure that financials will be reported in best manner. There arethree principles of financial reporting and same are explained below.
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