Importance of Financial Reporting Standards and Their Characteristics

Running head: FINANCE
FINANCE
Name of the Student
Name of the University
Author Note

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Table of Contents
Answer to Question 1......................................................................................................................2
Answer to Question 2......................................................................................................................4
Answer to Question 3......................................................................................................................7
Answer to Question 4......................................................................................................................7
References......................................................................................................................................10

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Answer to Question 1
The financial accounting standards and the International Financial Reporting Standards
have been established in order to keep a check on the different accounting statements which is
prepared by various organizations and to see to it that the framework of an integral reporting
system is maintained. However in the article “Unwieldy rules useless for investors”, the given
statement has been criticized and it has been stated that the IFRS and other standards are not
adequate.
According to Hogg (2016), the financial reporting serves the given objectives:
1. Provides useful information to the investors and guides them in the decision making
process
2. The cash flows which may be received by the organization in the future can be analyzed
3. If an organization goes through any major change in its business domain, then even that
can be analyzed easily using the financial statements (Barth et al. 2008).
The different financial reporting systems are generally based on the conceptual
framework which acts as a guideline. Given below are the characteristics of a conceptual
framework:
 The report must have adequate relevancy. This means that the report must be based on
relevant information which is actually useful to the decision makers and assist them in
their decision making activities (Ahmed, Neel and Wang 2013). If the financial statement
is not relevant, then the primary purpose of the organization may go for a toll.

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 The financial statements need to be prepared in a manner such that they are easily
comparable in nature, this means that they are to follow a set format which will assist
them in ensuring that the performance of the different years can be viewed at once or
between different companies are easily accessible.
 They should be providing a true picture of the organization and its activities. This means
that the financial statement must possess the capability of ensuring that they are easily
able to represent the correct financial position of the firm and not hide any aspect which
may be crucial to an investor`s decision making (Bentley, Omer and Sharp 2013).
 The financial statements need to be presented on time. This means that they should have
the capability of being available at the right time and in the right manner so that they can
be utilized.
 They should be clearly understood in nature and must possess the capability of
possessing clarity.
If the financial statements of the organization do not possess the given characteristic features
then they lose their relevance.
The given article states that although the given points stated have the adequate features
and capabilities which a report must comprise of, however the IFRS Standards do not have the
present capability of justifying these characteristics (Lequiller and Blades 2014). The article
examines, that the adjustments present in the IFRS are not Relevant enough and often provide
misleading information to the different customers. Furthermore, the reports which are being
prepared under the given guideline cannot be compared easily as well.