Analyzing the International Financial Reporting Standards Framework

Accounting plays a critical role in corporate decision-making by providing essential information that informs strategic planning and risk management. Through the adoption of International Financial Reporting Standards (IFRS), organizations achieve greater transparency and comparability, enhancing investor confidence and facilitating better financial decisions. Research indicates that accounting conservatism during economic downturns serves as a protective measure against investment missteps. Additionally, enterprise risk management practices linked with robust accounting systems contribute to effective governance and improved financial performance. This assignment synthesizes these insights, drawing from recent studies to present a cohesive analysis of accounting's influence on financial strategies.

Running head: FINANCIAL REPORTING AND ANALYSIS
Financial Reporting and Analysis
Name of the Student:
Name of the University:
Author’s Note:

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FINANCIAL REPORTING AND ANALYSIS
Introduction
The process of conceptual framework is a contemporary concept. There are various
accounting standard constructors that have operated historically with the absence of the
conceptual framework. This has led to the standards of accounting being disorganized in nature
and have been an answer to the scandals and the issues of the day that has been reactive more
than being proactive (Radebaugh 2014). The absence of an effective conceptual framework even
enhances the level of risk that the standards and unpredictable with one another and there is no
common goal for the construction of the financial reports.
A declaration of the roles of the financial statements have included a structure document
that increases the sturdiness of the process of setting standards, making sure that consistency is
maintained and aids in the construction of the future standards. The model can aid the users in
the elucidation of the data that is within the financial reports as it gives out an understanding of
the values on which they have been constructed. Every national body that constructs standard has
their individual conceptual model that provides the base on which the accounting standards are
reliant on (Cheng et al. 2014). There are many researchers who believe that coordinating these
models needs to be the priority constructing standards that has been accepted globally.
In reality, the conceptual framework should lead to the construction of the accounting
standards. The economic, social and political factors have even played a key role and have an
influence on the guidance that have been provided by the standards (Chauvey et al. 2015). The
need of capital regulators and market and the responses of the public to the scandals associated
with accounting and the credit crunch which initiated in the year 2007 and will sustain to have an
impact on the process of standard setting.

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IASB Framework for the construction and presentation of the Financial Statements
The framework for construction and presentation of the financial statements was declared
in the year 1989 by IASC and incorporated in the year 2001 by IASB. This deals with the aims
and objectives of the financial reports, the qualitative features that ascertains the information
usefulness within the financial statements. It even deals with the explanation, measurement and
identification of the elements out of which the financial reports are generated and the notions and
ideas of capital and its preservation (Gebhardt, Mora and Wagenhofer 2014).
In the year 2008, the IASB disclosed an exposure draft which handles the aim of financial
reporting and the characteristics that are qualitative in nature. The framework is fretful with the
common intention financial reports that are inclusive of the consolidated financial statements.
These financial reports are constructed and presented at least once a year and are directed
towards the general needs for the information of an extensive range of users. There are certain
users who may need and have the authority to gather, data in addition to the data which is
already existent in the financial declarations (Backof, Bamber and Carpenter 2016). There are
several users who may depend on the financial reports as their key source of financial data and
these data therefore be constructed and presented with their requirements in mind. The financial
reports form a segment of financial reporting. The key aspects of a complete group of the
financial statements are given as below:
 A proclamation of the financial condition during the end of the accounting period
 A declaration of the comprehensive income for an accounting period
 A declaration of the changes in the equity at the end of the accounting timeframe
 A cash flow statement for the accounting time

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 The notes that are consisting of the synopsis of the accounting regulations and policies
and other information that are explanatory in nature.
There are various entities that disclose a financial evaluation constructed by the
administration and elucidates and describes the key characteristics of the financial performance
and the financial scenario of an entity and the key challenges (Cohen, Krishnamoorthy and
Wright 2017). They may even explain the social and the environmental statements specifically in
the companies in which environmental aspects are crucial and when the employees are
considered as a key user group.
The objective of the financial statement
The aim of the common intended financial report is to disclose the financial data
regarding the reporting unit that is effective in presenting to the creditors and the potential
investors in undertaking decisions in their ability as the capital providers. The aim addresses to
financial reporting as a unit and not as a financial report.
The aim of financial statements concentrates on meeting the need of the data of the
primary user group. The key user group is made up of those who have the power on the
resources of an entity- their current and their prospective equity lenders, investors and various
other capital providers (Zhang and Andrew 2014).
The primary user group is attracted in the financial data as these information us helpful in
undertaking effective decisions that the lenders, investors and other creditors undertake within
their authority.
The decisions that are undertaken by the capital providers are inclusive of how and
whether to allocate the resources to a distinct body and how to safeguard and develop their

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properties. When undertaking these decisions, the capital givers are concerned in assessing the
capability of the body to construct the inflow of the cash and the stewardship of the
administration (Pelger 2016). The capital lenders make use of these information about the
resources of the entity, any claims for these resources and the transformations in the claims and
resources and the claims that are as inputs in the process of undertaking decisions.
Qualitative Characteristics of the financial reporting information
The qualitative features are looked upon as the aspects that make the data given in the
financial reports helpful for the users. The objective of financial reporting refers to the financial
data being helpful and it needs to have two key qualitative features namely relevance and loyal
representation.
The framework even explains the improving qualitative features which are harmonizing
to the principle qualitative features. The developing qualitative features differentiate more
supportive data from lesser helpful data. They develop the usefulness of the decisions of
financial statement data that is precise and represented faithfully. Each of them are explained as
follows;
Relevance: The precise and relevant data have the capability of creating a difference to the
decision of the financial statement user. The authentic data has an anticipating value as it assists
the users to assess the prospective impacts of the present, past and future transactions or the other
cases on the cash flow of the future and the confirmatory value as it assists to revise or confirm
their past assessments (Beattie 2014).
Faithful Representation: In order to be effective in the process of decision making, the data
must be represented loyally of the economic phenomenon that it contends to represent. The

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attainment of the faithful representation is possible when the explanation of an economic
scenario is neutral, complete and free from the materialistic inaccuracies (Sinclair and Keller
2014). The financial data that represents precisely about the economic phenomenon explains the
economic elements of the underlying transactional events or scenarios, which is not always
similar to their legal form.
An individual economic scenario may be presented in various aspects. For instance, an
assumption of the risk that is transferred in an insurance agreement may be highlighted
qualitatively. Furthermore, an individual explanation in the financial statements may explain the
multiple economic events (Wang 2014). For instance, the disclosure of the tools like the plant
and machinery in the financial reports may address the average of the overall plant and
machinery of an entity.
Completeness: An explanation of the economic scenario is absolute if it is inclusive of the
information that is essential for authentic representation of the economic scenario that it tries to
explain (Christensen et al. 2015). Exclusion can make the data to be misleading and false and
therefore not useful to the financial report users.
Neutrality: This is the nonexistence of bias that is needed to gain a predetermined outcome or to
encourage a specific attitude. The information that is neutral in nature is free of bias so that it can
represent faithfully the economic scenario that it looks to explain. The neutral information does
not bring in any colour to the image but it corresponds to have an influence in the attitude and
behaviour in a specific direction (Tschopp and Huefner 2015).
The financial declarations may not be neutral in case, by the presentation and assortment
of the financial data, they have an effect on constructing a decision or any judgment in order to

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attain an outcome that is predetermined. Conversely, saying that financial disclosure data should
be neutral may not explain that it would be without a purpose or it would not have an influence
over the behaviour (Balakrishnan, Watts and Zuo 2016). On the other hand, precise financial
information reporting by explanation have the ability of having an influence on the decisions of
the users.
The faithful representation does not reveal total independence from the inaccuracies as
most of the financial statement measures are inclusive of the assumptions of the several kinds
that implement the judgment of the management.
Neutrality and completeness of the assumptions are attractive, but a minimum extent of
accuracy is even essential for an assumption to be a loyal representation of the economic result.
Therefore, in order to gain a faithful representation, it is essential sometimes to disclose
explicitly the extent of the uncertainty in the financial information reporting (Christensen,
Nikolaev and WITTENBERG‐MOERMAN 2016).
Comparability: This characteristic of the information helps the users to recognise the
differences and similarities among the two kinds of the economic phenomena. Consistency
explains the utilisation of the same accounting processes and policies either in a single time
across the bodies or time to time within a body. Comparability is the aim and consistency is the
process to an end that assists in the accomplishment of the goal.
The aspect of taking a decision is assessing among the alternatives. Hence, data about a
body is more supportive if a comparison can be undertaken with data that are similar about the
other bodies and with similar data about the same body for some other time period.

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Verifiability: This quality assists the users in assuring that the data loyally represents the
economic scenario that it claims to exhibit (Guerreiro, Rodrigues and Craig 2015). Verifiability
expresses that various knowledgeable and independent onlookers could attain common
consensus even though not essentially conclude the contract that either:
(a) The data is a depiction of the economic proceedings that claims to represent without any
material bias or error or
(b) A suitable measurement or identification process that has been implicated without the
material bias or error.
Timeliness: The data should be available to the ones who are making decisions before it loses
their ability to have an influence on the decisions. The timeliness of having the precise data
sooner can influence decisions faster and absence of timeliness eliminates the usefulness of the
data for decision making.

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Conclusion
The availability of the conceptual framework that is useful for the purpose of
constructing financial statements creates a guideline with the help of which the financial
statements can be constructed by the management and thereby have the above explained qualities
that actually make the financial statements effective and precise and relevant for the purpose of
taking decisions. The qualities that have been explained earlier are the aspects that have been laid
down by the conceptual framework thereby making the financial statements worthy of using for
any kind of purpose. The framework explains the qualities that make the financial reports
effective and even tries to explain the key and basic components of the financial reports and
explains the criteria for measuring and identifying them. The FASB and IASB have been
working collaboratively on the aspect of conforming and revising their conceptual frameworks.
The framework that would be constructed should address only a single aim of financial reporting
and that of giving out information that is supportive to the users in undertaking investments and
other decisions related to allocation. The aspects identified in the financial reports and if there
are any prospects of economical benefits will be transferred to the decisions.

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