Importance and Objectives of Financial Reporting in Organizations
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This study highlights the importance and objectives of financial reporting in organizations. Financial reporting provides information for decision making, benchmarking, analysis, planning, and performance management. It is vital for shareholders and stakeholders.
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Running head: FINANCIAL REPORTING Financial Reporting Name of the Student: Name of the University: Author Note:
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1FINANCIAL REPORTING Introduction:Financial reporting can be described as the publishing of the financial information to the different types of the stakeholders associated with the business entity. The financialinformationconsistsoffinancialpositionandthefinancialperformanceofan organization over a specific period of time. The various types of the stakeholders include the governmentagencies,governments,debtproviders,public,creditors,investors(Leuz& Wysocki, 2016). This study will include a brief account of the financial reporting. Theimportance of financial reportingcan be emphasized and it is based on the each and every stakeholder for the different. The financial reporting is needed by every stakeholder for a different purpose and reasons. The financial reporting highlights the following importance. It assists the organization to comply with the different types of the regulatory requirements and the statues; Statutory audit is if facilitated through the financial reporting; financial reports are called the financial backbone of financial planning, bench marking, analysis and decision making; financial reporting helps the organizations to raise the capital both at the overseas and at the domestic level (Nobes, 2014). The majorobjective of the financial reportingaccording to the International Accounting Standard Board (IASB) are: financial reporting provides information so that an organization can be managed and is used for the purpose of je decision making, benchmarking, analysis, planning; financial reports provide information for the creditors, debt providers, promoters, investors and is used for prudent and rational decision making; financial reporting provides information for the public, shareholder and in different aspects of an organization; financial reporting provides information regarding how an organization is procuring the various resources; financial reporting provides information for the various stakeholders regarding the performance management of an organization (Pelger, 2016).
2FINANCIAL REPORTING Financial reporting and institutional features in the private firms that are located in Europe and US- the United States Securities Exchange Act states that only the public companies that have the asset value of exceeding 10 million dollar have to produce the financial statements. Whereas, in comparison to the public firms the private firms need not to provide the financial reports to the general public. The 7.6 million companies in Europe is required by law to file the financial statements. The regulatory framework of the financial reporting in the European countries states that the private companies were provided with an institutional environment that are based on the listing status rather than the legal form of a firm. The European regulations requires that the private companies need to disclose the financial reports to the general public (Habib, Ranasinghe & Huang, 2018). Conclusion- From the above discussion it can be concluded that that financial reporting is vital from the perspective of a shareholder and stakeholder. Although at certain situations publishing or disclosing the financial reports can be complex, but it has some benefits attached with it. Financial reports consist of the information that are both relevant and reliable and it is used by a number of the stakeholders for the various purposes.
3FINANCIAL REPORTING Reference Habib, A., Ranasinghe, D., & Huang, H. J. (2018). A literature survey of financial reporting in private firms.Research in Accounting Regulation,30(1), 31-37. Leuz, C., & Wysocki, P. D. (2016). The economics of disclosure and financial reporting regulation:Evidenceandsuggestionsforfutureresearch.JournalofAccounting Research,54(2), 525-622. Nobes, C. (2014).International classification of financial reporting. Routledge. Pelger, C. (2016). Practices of standard-setting–An analysis of the IASB's and FASB's process of identifying the objective of financial reporting.Accounting, Organizations and Society, 50, 51-73.