Exploring IFRS and its Impact on Financial Reporting

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Financial Reporting

Table of C contents
Introduction.................................................................................................................................................3
Lo 1.............................................................................................................................................................4
P1............................................................................................................................................................4
P2............................................................................................................................................................6
M1...........................................................................................................................................................7
D1............................................................................................................................................................8
Lo3..............................................................................................................................................................9
P5............................................................................................................................................................9
P6..........................................................................................................................................................12
M3.........................................................................................................................................................13
Lo4............................................................................................................................................................14
P7..........................................................................................................................................................14
M4.........................................................................................................................................................15
Conclusion.................................................................................................................................................16
References.................................................................................................................................................17

Introduction
The IFRS (international financial reporting system) is concerned with business affairs which are
related with financial accounts of a company; the IFRS provide guidance to the entire world so
that the accounts of a company can be easily under stable by the entire world. This study will be
critically examined financial reporting, governance of financial reporting and framework of
financial reporting. A company is preparing financial reporting for some specific reason and
those reasons will be briefly discussed in this study with the help from development and growth
scenario of the company. The needs of stakeholders for financial reporting also briefly discussed
in this study with the help of articles of IFRS. The benefits of IAS (International accounting
standards) and IFRS (International financial reporting systems) will be briefly discussed in this
study to take an idea about the effect of these standards on the accounting reports of a company.
The models of financial reporting and auditing will be briefly discussed in this study to take an
idea about models of accounting, so this entire study will be to cover each important topic of
financial reporting.

Lo 1
P1
Financial reporting
Financial reporting is a kind of statement which is used to present the financial data of a
company to the external parties such as investors or government (Madawaki, 2012). The
financial reporting is prepared in an effective manner, the finance department is completely
responsible for the making of financial reporting. The finance department sends all the reporting
to the higher authority of the company through which the authority examines the reports and then
provide orders to publish reports to the public so this entire process work in a chain. The
financial reports are also audit by the external auditors of the company so that if any fraudulent
activities arise in the books of accounts then that can be easily identified through the help of the
auditing process.
Regulatory framework
ManagementDirectors

The regulatory framework is playing an important role in the presentation of financial data by the
company to external parties of the company. The regulatory framework provides guidance’s to
companies so that they can prepare financial data in a way that external users can easily
understand (De Villiers et. al., 2014). The regulatory framework is necessary for the financial
reporting because without regulations firms cannot prepare financial reporting accurately and
without proper accuracy, it's quite difficult for the external parties to analysis the financial
performance of a company. If a company follow proper regulatory framework than the investors
are always become more confident in the financial reports and the investors always do invest in
that company which provides a fair picture of financial reports.
Responsibilities of directors towards financial reporting
The directors of a company are directly responsible for the accurate financial reporting, the
directors of a company must verify financial reporting before the publication of those reports in
the market. The directors are sent financial reports to the auditor and an auditor critically audit
the financial reports of the company. If auditors find any mistake in financial reporting than a
question arise on the intelligence of directors. The external users of financial reporting must get
some valuable information from financial reports and if they don't get any valuable information
than the reports are not made accurately.
Incorporated or Unincorporated organizations
The incorporated organization is a type of firm which is run by the owner of the firm and if any
kind of risky situation arise than that must bear only by the owner. In the incorporated
organization, the owner is responsible for everything that happens in the business whether that
related to profit or loss (Simnett, and Huggins, 2015).

P2
Aim of financial reporting
The prime aim behind the preparation of financial reporting is related to the profit or loss of a
company. The financial reports are critically analyzed through different tools of finance and
accounting than presented in front of external users so that they can analyse the financial
performance of the company (Leuz and Wysocki, 2016). The financial reports are prepared on
the behalf of external users and through these reports, investors find out the financial strength of
companies which is very useful in the financial analysis from an investor perspective. The
financial reports are also crucial from internal aspects of a company because the management of
a company use financial reports to make future budgets for the company and these financial
reports are also useful in the decision making the process of a company. A company is also
critical analysis the previous financial reports of the company to determine the financial
objectives and financial goals of the company.
The prime aim behind making financial reports is to meet the expectations of users and
legislation. The financial reports are a prime source of information for the investors because
financial reports reveal the financial statements of a company which is very useful for the
investors to analysis so the financial reports play an important part in the entire market. The
investors are always the prime source of capital for a company so if they want to increase capital
or they need more funds for operations than they can simply take help from the investor's and the
investors are always dependent on the financial reports of a company. The financial reports of a
company must be made according to the demand of investors because the investors are always
dependent on the financial reports of a company (Antoniou et. al., 2016)

M1
The financial reports provide the entire information about the financial activities of a company
and the financial reports of the company must be prepared according to the expectation of
stakeholders because the stakeholders are always interested in the financial reports of a company.
The financial reports are made on the basis of previous year's financial reports and the investors
critically compare and analyze the trend of the company to invest in that company. The investors
compare profitability of a company through previous financial reports and the current year's
financial reports. The investors are trying to analysis the current financial position of a company
through the financial reports of the company and then take investment decision on the behalf of
financial reports (Varsei et. al., 2014).
The rules and standards must comply for funding and investment
The rules and regulation are playing an important role in the companies because it's important for
every company to work according to some set of standards. The standards are not a compulsion
for the organizations to follow but if a company follow these standards than the investor’s faith
in the company increases so it’s important for a company to comply all the rules and standards
which is provided by the different institutions. A company can set up different departments of a
product like – marker research department which is critical analyze the market opportunities and
invest in those activities earn higher profits from the investment.

D1
The stakeholders are an important part of any business and the organization must produce their
reports according to the demand of stakeholders. The regulatory framework is an important part
of any business because the regulatory framework creates a good atmosphere in the company
which is very useful for the employees of the company. An organization can take help from
different sources to prepare their own regulations but the regulations are must be made according
to standards of financial accounting.
Financial position and cash flow prediction
The present financial position is playing an important role in the prediction about the future
financial position of the company. An organization can use current financial reports as a source
to analysis the financial position of the company and through the help from current financial
position a company can predict about future profit and losses of the company. The analysis of
current financial position is a critical task for shareholders but through the help of financial
reporting a company can easily identify the financial strength and financial weaknesses' of a
company. The annual reports of a company are a major source of data collection, the financial
statement represent income and expenses of a company in detail which provides the investor a
clear view about the financial position of the company.

Lo3
P5
International accounting standards
The international accounting standards provide useful guidance to the companies and this is the
oldest accounting standards (Hahn and Kühnen, 2013). The international accounting standards
are only used before 2001 but after the implementation of IFRS (International financial reporting
standards), the companies only use IFRS. The (IASB) International accounting standards board
is responsible for such implementations and the changes in these standards also made by the
ISAB. The IAS was formed in London in 1973. The investors are most of the time use
international accounting standards to compare the financial performance of the companies. The
international accounting standards are always beneficial for the companies because through these
standards they can easily analysis the financial performance of the companies.
The advantage of international accounting standards
The international accounting standards are always more beneficial for the large companies as
compare to small companies because large companies need to maintain a better cash flow system
and for that goodwill of company plan an important role. The accounting standards improve the
goodwill of the company in the market through which they generate more capital from the
market. The investors always inject their money into that company which is more transparent in
the financial aspects, so these are some advantage of international accounting standards.
 Improve ethics compliance
The international accounting standards provide determine high standards of ethics for the
companies which is useful for the company. The ethics always plays an important role in the
company because if every employee of the company works according to ethics than the chances
of fraud and misconduct in the company decline which make positive goodwill of the company

in the market. the international accounting standards require more actual data about the company
which brings transparency in the financial activates of the company.
 Improve investment
If a company is following proper standards of international accounting standards than they can
bring more transparency in the financial reports of the company which is ultimately attracting
more investors and through the help of this, the investment in the company also increases. If the
investors are getting more information about the financial reports of the company than they can
easily invest in the company.
So the above shown are the prime advantage of international accounting standards from the
business perspective.
IFRS (International financial reporting systems)
When the Board of international accounting standards is bringing changes in the accounting
standards than they come up with IFRS (international financial reporting standards). These
accounting standards provide guidance to companies through which they make their financial
reports.
These are some advantage of international financial reporting systems
 Expansion of business into international markets
The international accounting standards bring transparency in the financial reports of the company
which is generated cross border investment and through that the business of company expands in
new markets. The expansion of business creates a lot of benefits for the company such as higher
profits and increase brand value.
 Increase foreign capital inflow
The international accounting standards are also helpful in the procurement of capital, the
transparency in the financial reports creates interest in the investors which is increase cross

border cash inflow and investment. If the investment is continuous increases in a company than
the company can easily expand their business in into new markets and into new segments.
So these are some common advantage of international financial reporting systems from a
business perspective and despite this advantage, there are a lot of indirect benefits is also provide
these standards to the company.

P6
A company is using financial reports and auditing to show their financial data to the external
parties so it's important that the company must clearly present their data in a structural format so
that investors can easily understand the financial reports of the company (Karanikolos et. al.,
2013).
The investors get a lot of information from financial reports of the company such as market
information of product, the goodwill of brand in the market and value of product among
customers. The investors are always the most important part of any company and the company
must provide something valuable to their investors such as dividend and increase prices of
shares. The accounting standards are also helpful in capital allocation if a company use proper
accounting standards than they can effectively allocate their capital into different parts of the
business as well as outside the business. The investors are always looking towards the
profitability of the company but there are a lot of different ways through which investors can
easily assess the performance of the company.
The international accounting standards are providing guidance to the companies through which
they prepare their financial statements and show investors about the profitability of the company.
The international accounting standards also improve the trade relationship between the countries
or companies, the accounting standards create coordination between the countries and through
that they can easily improve their trade relations with other countries.