Financial Reporting: Conceptual Framework and Elements Report

This report provides a comprehensive overview of financial reporting, delving into the conceptual framework established by the IASB and its significance for businesses, investors, and stakeholders. It examines the key objectives of financial reporting, including the provision of complete and accurate information on a company's financial position and performance. The report analyzes the fundamental concepts such as recognition, measurement, and financial statement presentation, along with the fundamental qualities of relevance and faithful representation. Furthermore, the report explores the various elements essential for preparing financial reports, including recognition methods, measurement techniques, disclosure concepts, and the economic entities involved. It also covers the going concern principle, monetary unit assumptions, periodicity, and the accrual basis of accounting. The conclusion emphasizes the role of financial reporting in fostering business growth, transparency, and informed decision-making for stakeholders. The report references several academic sources to support its analysis.

Financial Reporting

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY ..................................................................................................................................3
Question 1 : Conceptual Framework for financial Reporting - ..................................................3
Question 2 : Various elements for preparing Financial reporting - ...........................................5
CONCLUSION................................................................................................................................6

INTRODUCTION
Financial reporting includes information regarding company’s internal structure such as
cash flow management, balance sheet of the company, and income generated. Final reporting is
prepared to help the investors, customers and stakeholders to see the growth structure and cash
security (Grimsley, 2019). Its main objective is to provide the complete information of the
business workings and utilization of cash and other activities in prescribes format. Report will
include conceptual framework for financial reporting and also evaluating the concepts and
assumption applies in the financial accounting including its fundamental qualities of reporting.
MAIN BODY
Question 1 : Conceptual Framework for financial Reporting -
Overview: IASB issued it conceptual framework to helps the business to prepare a proper
accounting statement which helps the investors and customers to analyse the business working
criteria. It defines the overview of reporting in form of nature, understanding, cash transaction
and preparation of the report.
Objective: The main objective is to provide the basic and important information to the
customers and investors (Kimmel, Weygandt, Kieso and Trenholm, 2016). They are the future of
the business so they have the right to know the business working and activities relating to the
cash inflows and outflows and strategy to save business from risk.
Fundamental concepts: The main objective of accounting is to keep a systematic record of data
and information and assemble its number and facts of the business on daily basis. This results in
help the customers and clients to analyse the business overall development plan and can easily
compare with other accounts as well. Its various fundamental concepts are ~
 Recognition: It recognises the business internal and external matters which helps them to
understand the business position globally (Cohen and Karatzimas, 2017). The revenue
generated and utilizes in which manner helps in recognising procedure.
 Measurement: It measures the actual facts and figures which helps the business to
overcome form the risk matters (Flower, 2016). It evaluates the specific value based on
the accounting concept.

 Financial statement presentation: It presents the business overall statement objective with
understandable accounting (Macve, 2015). This statement reflects the transaction relating
to inflow and outflow of cash and overall business activity working on daily basis.
Fundamental Quality: It includes various fundamental quality such as ~
 Relevance: The major quality is that information mentioned in the accounts must contain
relevant details so that decision making is easier for the business. It shows good
understanding and predictive value so that business is capable to handle risk factors and
overcome from issue raised (Gaynor, Kelton, Mercer and Yohn, 2016). The facts and
numbers are relevant to the previous numbers so that layman can easily distinguish and
compare with other accounting records. Hence, accounting information must be disclosed
timely which in turn ensures its relevance. For instance: financial statements which are
published timely has more importance in comparison to the one which presented after
several months.
 Faithful representation: It is to be presentable and understandable before any person it
should be completes with free form errors. To present a valid report it should not contain
over written work and is majorly neutral form the other report. To prepare a report, one
should clearly examine that it is faithful and clear enough so that an outsider who has
some interest in the business can easily take interest in the business and feel interested to
invest on the business activities. On the basis of element pertaining to faithful
representation financial reports must be free from error and complete. Along with this,
aspect pertaining to neutrality must be followed. Accordingly, company should not
manipulate financial information with the motive to influence decision making aspect of
users.
 Enhancing Qualities: It enhances the qualities of the business by mentioning in the report
about the time management and comparability with the other factors. It represents the
good understanding technique and helps in decision making regarding various facts and
figures. It compares the transaction of the business on daily basis with previous
information which helps the business to critically examining the facts. If information is
verified, it helps the user to invest or deal in business internal matters (Hoyle, Schaefer
and Doupnik, 2015). The information mentioned in the report must be understandable so

it might use by the government to check the business status and compare its
characteristics and presentation of the reporting from other company report.
Question 2 : Various elements for preparing Financial reporting -
Recognition: It is also said to be revenue recognised methods as under this method it is
based on assets, liabilities, income and expenses which mainly not based on cash values
but other revenue which business generated for the other financial activities of the
business.
Measurement: It is based on the monetary value tat helps to measure the business
historical cost, fair value, replacement cost and settlement amount (Kimmel and et.al.,
2016). If the company deals with other company these factors helps the business to
measures the numbers and figures from the reports of other company details.
Disclosure concepts: It discloses all the relevant information of the company such as
records of assets, liabilities, equity amount and other income and expenses should be
disclosed in the financial statement (Cohen and Karatzimas, 2017). In the report other
important matters are also enclosed, so that it helps the investor to easily evaluate the
company report and their financial background in the market.
Economic Entities: In this entity it separates the transaction from owner personal entries
mentioned in the statement (Flower, 2016). As this rule is applicable on the same
company with different divisions. Eg. ENSCO Plc borrow an office building for
$1,00,000 this is mentioned in the report but the room designing expenses in not
mentioned in the report.
Going concern: This concept helps the financial statement to not represent their company
net worth if the company goes into liquidation. They can overcome from that issue
through company assets value over from its lifetime saving values (Macve, 2015). eg.
BBC company closes its one branch and continue with others as shutting down of one
branch didn't affect the operation of the company.
Monetary unit: It represents the transaction that is mentioned under the terms of currency.
Thus, in this assumption no such transaction are recorder such as employee pay skills,
customer quantity or integrity of the staff. e.g. data mentioned as Dollar, pounds etc.
Periodicity: It means that accounting of the business should be done on the basis of the
period report such as monthly, quarterly and yearly basis (Gaynor and et.al., 2016). It's

critically examine on the report about the company net worth and total income earned
during the certain period. Eg. If Intellect Soft prepares a report of income generated than
they refer the 1st April - 31st March financial year to analyse the report.
Accrual Basis: In this assumption, the accounting are prepared on the basis of revenue
earned and expenses are incurred form the overall business entries. It is based on
estimates and prediction which can occur in near future (Hoyle, Schaefer and Doupnik,
2015).
CONCLUSION
From the above study it can be concluded that financial reporting helps the business to
grow more and clarify all the details of working in the organisation (Cohen and Karatzimas,
2017). It also helps the customers and investor to examined the business closely its financial
transaction. It helps to interpret various quality regarding understanding and presenting in a
proper format so that it can be easily identified by the customers. Its elements helps the business
to be more predictive towards achieving goal.

REFERENCES
Books and journals
Cohen, S. and Karatzimas, S., 2017. Accounting information quality and decision-usefulness of
governmental financial reporting: Moving from cash to modified cash. Meditari Accountancy
Research. 25(1). pp.95-113.
Flower, J., 2016. European financial reporting: adapting to a changing world. Springer.
Gaynor, L. M., Kelton, A. S., Mercer, M. and Yohn, T. L., 2016. Understanding the relation
between financial reporting quality and audit quality. Auditing: A Journal of Practice &
Theory. 35(4). pp.1-22.
Hoyle, J. B., Schaefer, T. and Doupnik, T., 2015. Advanced accounting. McGraw Hill.
Kimmel, P .D., Weygandt, J. J., Kieso, D. E. and Trenholm, B., 2016. Financial Accounting.
Wiley Custom Learning Solutions.
Macve, R., 2015. A Conceptual Framework for Financial Accounting and Reporting: Vision,
Tool, Or Threat?. Routledge.
Online
Grimsley, S., 2019. What Is Financial Reporting? - Purpose, Statement Examples & Analysis.
[Online]. Available through: < https://study.com/academy/lesson/what-is-financial-
reporting-purpose-statement-examples-analysis.html>.