International Financial Reporting: Framework, Stakeholders, and IAS 1

This report provides a comprehensive analysis of international financial reporting, emphasizing the significance of sound accounting practices in mitigating corruption and fostering business growth. It explores the purpose and context of financial reporting, the regulatory and conceptual frameworks, and the role of qualitative characteristics in ensuring reliable financial information. The report identifies key stakeholders and highlights the benefits of financial information for organizational objectives. It delves into the presentation of financial statements according to IAS 1, including the profit or loss statement, statement of changes in equity, and financial position statement, and compares the information provided by the statement of cash flow. The report underscores the importance of accrual accounting and effective financial management for investors and creditors, concluding with a discussion on the impact of financial reporting on organizational growth and transparency.

INTERNATIONAL FINANCIAL REPORTING
Student’s Name:
Student’s ID:
1

Executive summary
The report has discussed the importance of good accounting practice. The international business
investors are presented with a business report on financial reporting. The financial reporting can
be effective for reduction in corruption and thereby reduction of wastages. It eventually promotes
growth for the business organisation. There is the concept of an accrual accounting system that
helps in improvement in financial performance. The management of financial organization can
be held largely responsible for assessing both perspectives of creditors and investors. Generation
of net cash flow can be very effective for the generation of net cash flow statement.
2

Table of Contents
Introduction......................................................................................................................................4
1. Purpose and context of the financial reporting............................................................................4
2. Examination of the regulatory and conceptual framework, its requirement, key principles and
role of qualitative characteristics in making reliable financial information....................................5
3. Identification of the main stakeholders of an organization and explanation of key benefits from
financial information.......................................................................................................................7
4. Value of financial reporting for meeting objectives of the organization and its growth.............9
5. Presentation of the financial statement as per IAS 1.................................................................10
a) Profit or loss statement and statement of other different comprehensive income.................10
b) Statement of changes in equity..............................................................................................10
c) Financial position statement..................................................................................................10
d) Information of statement that cash flow offers to the concerned stakeholders in comparison
to the above financial statements...............................................................................................11
Conclusion.....................................................................................................................................11
Reference list.................................................................................................................................12
Appendices....................................................................................................................................15
Appendix 1.................................................................................................................................15
Appendix 2.................................................................................................................................16
3

Introduction
Accountancy firm worldwide needs to implement effective financial accounting practice that can
be required for elimination of corruption in the business practice. The international investors are
confused with the present situation, as in the current market; there have been a lot of scams. It
can have a negative effect on organisational growth. The discussion has been made on the
purpose and context of financial reporting, regulatory and conceptual framework of financial
reporting and identification of main stakeholders in the process and their role in organisational
growth. Finally, a discussion has been done on the financial statement as per IAS 1.
1. Purpose and context of the financial reporting
In the modern world economy, financial reporting plays the most crucial role in ensuring a better
management of financial aspects of the business organisations. The financial reporting can be
helpful for offering useful and relevant information to the leaders and owners of a business
organisation. In order to get an effective control over the company, it is very essential for the
organization to adopt better management of financial reporting. Needs and demands of financial
user's statement of the company can be met successfully by the development of a better
conceptual framework of the financial statement. Financial reports are considered records and
documents for tracking and reviewing the direction of resource utilisation (Patro and Gupta,
2016). Accurate financial statement helps both shareholders and lenders to take effective
decisions about efficient resource management. The objectives of the financial statement include
ensuring future growth, reinvest in profit generation, and focus on capital generation, mitigation
of liabilities. Scandal in the modern business organisation is a major barrier to successful
business growth. There has been a proliferation of accounting scandal in modern business
companies.
Figure 1: Purpose of the financial reporting
(Source: Influenced by Lahmar and Ali, 2017)
The proliferation of scandals relating to the accounting is causing a lot of loss to the business.
There have been instances of lowering of the growth for such poor performance of the business
organisation in providing a proper direction to world business. The international business
4
MitigationofcorruptionImporevementingrowth

investors need to be well aware of the present risks in the world market and the ways these risks
can be minimised significantly. Better evaluation of the risk management system in financial
reporting can provide international investors the opportunity of reviewing the entire system in
the world market. There needs to be a particular system for ensuring of accountability and
compliance of the financial reporting. It would be better to manage this present system from the
level of complexity (Lahmar and Ali, 2017). The most problematic aspects of ineffective
financial reporting include scandal and complexity. The complexity in business scenario needs to
be eliminated by the introduction of setting a standard financial reporting. It needs to be
considered that there are a particular some requirements in the management of finance in the
business organisation. Thus, relevant rules and regulations in regard to financial reporting can
have a better impact on overall accounting. There are corrupt practices in businesses that are
responsible for such rampant scandal. The main purpose of financial accounting is to bring
transparency in the accounting system. Modern financial reporting generally focuses on
innovative technologies for the enhancement of better financial reporting.
2. Examination of the regulatory and conceptual framework, its requirement, key
principles and role of qualitative characteristics in making reliable financial information
Accounting regulations are generally concerned with ensuring a better statement for financial
statement of the user. The regulatory body in the business organisations is responsible for
enhancing the ability of decision-making. It is vital to implement a better practice of financial
statement for maintaining an accounting standard in the business organisation. As recommended
by Lang and Stice-Lawrence (2015), in order to ensure uniformity in presentation and
preparation of corporate reports, there are crucial roles of an accountant. The accountant needs to
be aware of the global economy and the implication of the global economy in financial
performance. There is a representation of the global economy and other accounting factors such
as technological improvement, the introduction of better methods in the management of finance
which can have a greater impact on the overall success of the global business. According to
Nobes (2014), certain regulatory frameworks in the UK provide security for global investors.
Functions of the regulatory boards include development and publishing of accounting standard in
the interest of customers. Preparation of financial statement requires close attention to the very
aspects of the business firm. The accountant management needs to consider the view of every
stakeholder in the company for bringing improvement in the management of financial statement.
In order to secure an effective system of the financial statement, an accountant can hold regular
meetings with employees. The employees are aware of potential risk and opportunities in the
organisation and knowledge of common employees need to be evaluated for achieving a better
result of the effective financial accounting system. As recommended by Graham et al. (2017),
the power of business organisations can differ from one business organisations to another. Thus,
financial managers need to consider the factors of each organisation while developing financial
reporting statement. There are specific functions of the regulatory board that guide them to make
an appropriate system of financial management (Muniraju and Ganesh, 2016). The power of
regulatory authority includes identification of accounting system, determination objectives and
scopes of that standard. In order to identify accurate financial statement in the business
organization, there is a requirement for standardisation and also the establishment of priority for
addressing of those problems. According to Kaya and Koch (2015), a regulatory framework can
prescribe specific procedures and methods for standard production. Approval and enforcement of
accounting laws and regulations need to be monitored very efficiently. In order to exercise
provisional powers in accounting practices, the accounting managers can implement sufficient
5

and reliable practices.
There can be the implementation of better accounting standard which helps in process of
standardisation. Companies act of 2006 helps in the establishment of a duty of an accountant.
IAS regulation further provides guidance to effective management of regulatory authorities. The
management of the organisation can allow stakeholders to making efficient decision-making
procedures. Incorporation of additional procedures in the accounting system can provide issuing
of a particular accounting standard. Most relevant accounting standard adopted by financial
regulatory authority include disclosure of the accounting policies, construction of contracts,
accounting for the purpose of depreciation. The framework of the financial statement suggests
that there are certain qualitative characteristics of the financial statement that can address issues
and problems with the current financial statement. There is a specific general purpose of
financial management and the primary purpose of management can be helpful for making a
better relationship with potential investors, creditors, and lenders. As argued by Situmeang et al.
(2018), an aspect of economic claims and resources need to be considered for the purpose of
assisting an effective system of financial performance management. In order to evaluate the
solvency and liquidity of the accounting practice, the accountant can help the prediction of
economic statement for the future perspectives (Marin, 2017). Management of economic
resources can be helpful for obtaining a perfect system of accounting practice and reduction of
scandal. Any large-scale scandal in financial reporting needs to be monitored for obtaining an
accurate financial statement.
Characteristics of financial statement can be very relevant in assessing faithful and relevance
representation of the financial statement. Characteristics of accurate financial management
system can be required for better management of relevance in the system of accounting. As
suggested by Kim et al. (2014), relevant information for management of financial statement
needs to be evaluated for bringing a difference in the decision-making ability of the users.
Figure 2: Qualitative characteristics of the financial information
(Source: Influenced by Ali et al. 2016)
Maternity can be considered as one of the entity-specific aspects of relevance and it is generally
6

based on magnitude or nature of the items that can be relatable to information in the context of
the financial report of the individual entity. Faithful representation can represent phenomena in
the economy in terms of numbers and words. The financial information needs to be both accurate
and relevant, as these two factors are very much helpful for taking the most appropriate decisions
in accounting management purpose. Faithful representation in accounting practice helps in
representation and identification of underlying characteristics of the neutrality, freedom, and
completeness from error. Support of natural depiction can assist in the exercise of the prudence.
Prudence, on the other hand, is considered an exercise of caution. The caution is made when an
accountant makes a judgement under uncertainty conditions. As opined by Ali et al. (2016),
application of qualitative characteristics helps in collection of faithful and relevant representation
of information. In order to enhance qualitative characteristics, certain factors need to be taken
into account. The factors include verifiability, compatibility, understandability, and timelines.
These are the qualitative characteristics that can allow enhancement of relevant and useful
information to the targeted user (Kastrati, 2015). The factor of compatibility can be further useful
for identification and understanding of similarities and differences in the enhancement of useful
information such as item. Rapid changes in the world market have necessitated accountant to
adopt different management system.
Cost can be a pervasive constraint in spreading of awareness and it can further provide a general
purpose in the style of reporting. According to Lestari (2015), the financial reporting in this
aspect includes the imposition of cost on the information and also the justification of that cost for
the purpose of benefiting process of information reporting. There are specific elements in process
of financial reporting. The elements can be essential for reporting of transaction effect and also
the classification of economic characteristics into the broad group. The important elements of the
financial statement include liabilities, asset, and equity. These three elements can impact
expenses and income generation. The statement of cash flows deals with the generation of
income statement generation and also manipulating elements of the balance sheet. An asset is a
form of resource that can be controlled by the entity for making future benefits. The future
benefits in economic condition help in generation of expected flow in the generation of the
economic entity. Liability in financial management needs to be considered for the purpose of
determining the expected outflow of resources from the entity. As recommended by Christiaens
et al. (2015), in order to recognise the financial statement of the balance sheet, it can be
important to incorporate satisfaction of the accounting criteria. The criteria that are associated
with asset management include the determination of future economic benefits. The global
investors can consider all these aspects of accounting practices for bringing improvement in the
measurement of performance (Andrew, 2015). Value or cost of financial statement can have a
greater impact on the measurement of reliability and obligation.
3. Identification of the main stakeholders of an organization and explanation of key
benefits from financial information
In the business organisation, there are multiple stakeholders who are associated with the
organisation directly or indirectly. Any decision by the management of that organisation is likely
to impact all the stakeholders. The stakeholders in the business organization include employees,
government, customers, creditors, suppliers, trade union, community, investors and owners. The
government in the business organisation is associated with the aspect of the legislation, VAT,
taxation, legalities, externalities, employment and truthful reporting.
7

Figure 3: stakeholders of an organization
(Source: Influenced by Adeyemo et al. 2017)
A better financial management in the organisation would definitely benefit the government, as it
would impact the collection of tax. An effective and efficient system of tax collection in the
business organisation help in increase in profit and an increase in the profit means that the
government is earning extra through taxation. Employment generation is one of the primary
targets of government and a good accounting practice can bring better job opportunities.
Employees are also one of the prime beneficiaries of good accounting practice. Transparency in
financial reporting helps in improvement of profit and it can ultimately improve the condition of
the employees through better wage. A corruption free organisation is the most suitable place for
the employees to work. The employees are concerned with job security, the rate of payment,
respect, truthfulness, communication, appreciation, recognition and acknowledgement (Chen et
al. 2018). A transparent system in their organisation helps in fostering of all these factors. As
suggested by Adeyemo et al. (2017), customers are also important stakeholders of a business
organisation. The customers generally deal with quality, value ethical products and customer
care of the organisation. A standard reporting system can be very effective for enhancement of
value and customer care. The present-day customers are conscious of the ethical factors of a
modern business organisation. Appreciation of ethical aspects could be needed for enhancement
in dealing with customers. An ethics in financial practices assist in the promotion of ethical
products and services of the organisation. As suggested by Balsmeier and Vanhaverbeke (2018),
suppliers in the business organisation are responsible for the exploitation of equitable
opportunities in the business organisation. In order to utilise the end product, the business
organisation needs to consider the aspect of end products. Rampant corruption in the financial
practices of the business organisation cans dissatisfied suppliers. A massive corruption in the
organisation can have a very negative implication on the overall business implication. The
management of the business organisation needs to ensure that there are no such procedures in the
organisation that can affect the protection of workers for exploitation of the opportunity. As
recommended by Weaver and Woods (2015), creditors are generally responsible for new
8
CustomersCreditorsSuppliersCommunityInvestorsOwners

contracts, liquidity, and credit score. A better credit score can contribute to the management of
the effective system in the business scenario. A better protection of management skill can be
required for the evaluation of job involvement. A better management practice can promote
effective and efficient accounting practice. The community member in accounting practice can
be helpful for promoting better management of the trader community. As recommended by
Aletkin (2014), trade unions are responsible for promotion offer of the effective management
system. Good financial reporting and accounting system in the business organisation can
contribute to better time management. Time can be managed very effective by the introduction
of the aspect of the innovative and creative method of time management in the practice of
accounting. As suggested by Demir and Bahadir (2014), cash flow management can allow the
recording of the payable and receivable system. There is the availability of accounting software
in the market that can be essential for the promotion of efficient and faster management of work
culture in the present scenario. The automatic and fast system of the financial statement needs to
be evaluated for professional practice. The stakeholders in the business organisation need to be
given extra emphasis, as it can ultimately improve the resolution of critical aspects of decision-
making ability (Andersson et al. 2016). In order to keep the stakeholders in a good position, the
organisation needs to ensure that there is a computerised system for the involvement of important
stakeholders. It is vital to consider the interest of shareholder for initiating accounting decisions.
A regular meeting with the stakeholder can ensure that the shareholders are going in their proper
direction in business organisation (Uwuigbe et al. 2017). The shareholders need to ensure that
there is a regular system in a business organisation that can direct better communication with the
shareholder. An effective and better communication with the shareholders can be helpful for
understanding different grievances of the shareholders regarding financial reporting.
4. Value of financial reporting for meeting objectives of the organization and its growth
The financial reporting in the business organisations is associated with value generation. The
value in the organization can promote generation trust, belief. Transparent financial reporting
assists in the promotion of transparency. The transparency in the business organisation can be
further helpful to enhance financial performance. The better management for accounting in the
business organisation is believed to increase both brand recognition and value generation.
Customers are attracted with the organisation that offers ethical responsibility to the society
(Abdullahi and Abubakar, 2017). The basis of financial reporting is the adoption of neutrality
and transparency by the management. In this way, the management learns to develop a certain
value for the business organization. It can be further assessed that there are certain factors that
are associated with value generation in the business organisation. The important factors include
analysis of income statement analysis of balance sheet and also ratio analysis (Refer to Appendix
1). As suggested by Leuz and Wysocki (2016), an effective system of ratio analysis in the
business organization ultimately help in improvement in the overall growth of the business
organisation.
A better ratio management further is helpful for prevention of extra cost. Financial reporting
contributes to the effectiveness of a better business scenario. In order to analyse a current aspect
of financial effectiveness, management of business organisation encourages participation of
employees in the improvement of value generation. According to Chikwemma et al. (2016), the
value in the business organisation can be associated with honesty, integrity, and courage.
Financial reporting in the business organisation utilise each of the factors for bringing
improvement in financial analysis. Liquidity in the organisation is referred to an integral factor
that can allow meeting existing obligations of the organisation and offering the company
9

opportunity of providing a better opportunism. As recommended by Olibe (2016), promotion of
effective management system in the organisation needs to be improved for adding value. Cash
flow of business can be tracked easily with the utilisation of an effective system of value
generation in the business organisation. There is the responsibility of the owners to ensure that
all credible responsibilities are met carefully. The value in the business entity helps in better
management of growth factor (Yahaya et al. 2015). An aspect of monetary measures can prevent
unethical competition among business companies.
5. Presentation of the financial statement as per IAS 1
a) Profit or loss statement and statement of other different comprehensive income
In order to make a presentation of loss or profit section, there is a requirement of minimum
items. The items include finance cost, revenue, tax expense, single amount of total discounted
items, certain loses or gains associated with financial asset reclassification, amount of discounted
items, loses and gains financial asset de-recognition which is measured at the amortised cost, loss
or profit associates share and joint venture accounted for the purpose of utilisation in equity
method. Expenses recognised in loss or profit need to be analysed by function or nature
(Garanina and Kormiltseva, 2014). Nature, in this case, refers to depreciation, staffing cost, raw
materials. On the contrary, the function, in this case, refers to administrative, cost of sales and
selling. The categorisation of an entity by function requires disclosure of amortisation, minimum
depreciation, and expense of employee benefits.
b) Statement of changes in equity
● There is a requirement of entity for the presentation of the separate statement of equity
changes. The statement needs to show comprehensive income for a certain period and the
income can be shown separately to the income. The income needs to be attributable to the
interest of owners.
● There is a specific effect from retrospective application from the restatement or policies
of accounting. The retrospective statement is made in accordance with IAS 8 and it is
separate for an individual component of different comprehensive income
● The statement of changes in equity also implies that there is specific reconciliation
between period end and at the beginning of carrying amount. It is done on the basis of an
individual component of the equity (iasplus, 2018). It further helps in the disclosure of
loss or profit, other comprehensive income, and also transaction with the owners for
purpose of showing separate contribution by distribution to the owners and also interest
changes in ownership. Comprehensive income analysis requires a close attention of item
that is required for presentation of the statement in notes.
● In the face of state changes there are certain factors which can determine equity changes
statement. The amount is measured by a recognised dividend of the distribution and also
the related amount of very sharing.
c) Financial position statement
The organisational entity needs to consider the presentation of classified statement for the
purpose of financial positioning, separation of non-current and current asset and also the
liabilities. The financial positioning is also required for the purpose of purpose of presentation on
the basis of provided liquidity information (Refer to the Appendix 2). Separation of the long-
term amount in the financial sector can be further helpful for the realisation of expectation in the
current scenario (iasplus, 2018). There is a requirement of a current asset because it can help the
realisation of the expected outcome in the business scenario. It can further assist in holding
trading purpose responsible.
10

d) Information of statement that cash flow offers to the concerned stakeholders in
comparison to the above financial statements
Profit or the loss statement generally focuses on the generation of total income rather than fewer
expenses. It generally excludes other components of the comprehensive income. The other
comprehensive income refers to items of both expense and income (iasplus, 2018). Items of
expenses and income can be evaluated for the purpose of determination of required loses and
profits. In order to provide a better analysis of income generation, it can be vital to integrate
transaction of vent for the purpose of determining equity share. On the contrary, it is crucial to
consider reconciliation between the profit and loss in accordance with comprehensive income
generation.
Conclusion
It can be concluded that effective accounting management system can improve the financial
reporting system. The financial reporting system is helpful for the prevention of corruption in the
business organisation. Increased competition in the business organisation worldwide requires a
close attention by the financial management. In order to improve better management of business
scenario, it is vital for the business firm to initiate the process of adding value to the existing
system. Detailed invoices practices for improvement in the financial practices need to be
assessed by the risk assessment committee. There needs to be an effective risk management
committee in the business organisation for improving the present business scenario.
11

Reference list
Abdullahi, A. and Abubakar, M.Y., (2017). Adoption of International Financial Reporting
Standards (IFRS) and Measurement of Reporting Quality: A Review of Methodologies.
Available at: http://ibarj.com/index.php/ibarj/article/viewFile/10/12 [Accessed 3/11/18]
Adeyemo, K.A., Ajibolade, S.O., Uwuigbe, U. and Uwuigbe, O.R., (2017). Mandatory Adoption
of International Financial Reporting Standards (IFRS) by Nigerian Listed Banks: Any
Implication for Value Relevance?. International Journal of Accounting Research, 42(90), pp.1-
13. Available at: http://eprints.covenantuniversity.edu.ng/8588/1/Mandatory%20Adoption%20of
%20International.pdf [Accessed 24/11/18]
Aletkin, P.A., (2014). International financial reporting standards implementation into the Russian
accounting system. Mediterranean Journal of Social Sciences, 5(24), p.33. Available at:
http://www.mcser.org/journal/index.php/mjss/article/download/4930/4772 [Accessed 21/11/18]
Ali, A., Akbar, S. and Ormrod, P., (2016), March. Impact of international financial reporting
standards on the profit and equity of AIM listed companies in the UK. In Accounting Forum
(Vol. 40, No. 1, pp. 45-62). Elsevier. Available at:
https://tarjomeplus.ir/public/UploadFileEn/TPLUS_EN_2005.pdf [Accessed 27/11/18]
Andersson, T., Haslam, C., Tsitsianis, N., Katechos, G. and Hoinaru, R., (2016). Stress testing
International Financial Reporting Standards (IFRSs): Accounting for stability and the public
good in a financialized world. Accounting, Economics and Law-a Convivium. Available at:
http://uhra.herts.ac.uk/bitstream/handle/2299/17480/AEL_submitted.pdf?sequence=2 [Accessed
16/11/18]
Andrew, K.K., (2015). Effect Of Corporate Attributes On International Financial Reporting
Standards Disclosure Level. Evidence From Kenya Listed Firms. Research Journal Of Finance
And Accounting Vol, 6, pp.2222-1697. Available at:
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.680.9140&rep=rep1&type=pdf
[Accessed 5/11/18]
Balsmeier, B. and Vanhaverbeke, S., (2018). International financial reporting standards and
private firms’ access to bank loans. European Accounting Review, 27(1), pp.75-104. Available
at: https://core.ac.uk/download/pdf/80793000.pdf [Accessed 23/11/18]
Chen, F., Hope, O.K., Li, Q. and Wang, X., (2018). Flight to Quality in International Markets:
Investors’ Demand for Financial Reporting Quality during Political Uncertainty
Events. Contemporary Accounting Research, 35(1), pp.117-155. Available at:
https://onlinelibrary.wiley.com/doi/pdf/10.1111/1911-3846.12355 [Accessed 4/11/18]
Chikwemma, M.P., Ursula, E.N. and Sunday, A.A., (2016). INTERNATIONAL FINANCIAL
REPORTING STANDARDS FOR SMALL AND MEDIUM ENTERPRISE (IFRS FOR SMES)
AND THE STATEMENT OF ACCOUNTING STANDARDS (SAS): A COMPARATIVE
STUDY. International Journal of Finance and Accounting, 1(3), pp.79-94. Available at:
https://www.iprjb.org/journals/index.php/IJFA/article/download/211/270 [Accessed 18/11/18]
Christiaens, J., Vanhee, C., Manes-Rossi, F., Aversano, N. and Van Cauwenberge, P., (2015).
The effect of IPSAS on reforming governmental financial reporting: An international
comparison. International Review of Administrative Sciences, 81(1), pp.158-177. Available at:
https://biblio.ugent.be/publication/5647283/file/6913915 [Accessed 25/11/18]
Demir, V. and Bahadir, O., (2014). An investigation of compliance with International Financial
Reporting Standards by listed companies in Turkey. Accounting and Management Information
Systems, 13(1), p.4. Available at:
https://www.researchgate.net/profile/Volkan_Demir5/publication/317068381_An_investigation_
12