Financial Reporting: IASB Framework, Concepts, and Principles

This report provides a comprehensive overview of financial reporting, focusing on the International Accounting Standards Board (IASB) conceptual framework. It begins with an introduction to financial reporting and its importance to organizations, highlighting its role in communicating financial information to stakeholders. The report then delves into the IASB's objectives for financial reporting, emphasizing its role in providing information for decision-making, investment, and enhancing social welfare. Key concepts such as accrual and going concern are examined, along with the fundamental qualities of financial reporting, including understandability, relevance, comparability, and timeliness. The report further explores the application of accounting concepts like recognition, measurement, and disclosure, as well as the basic assumptions such as economic entities, going concern, monetary unit, periodicity, and accrual basis. Through examples, the report illustrates how these concepts and principles are applied in preparing financial statements, ultimately aiming to assist users in making informed financial decisions. The report concludes by summarizing the critical aspects of the IASB framework and its impact on the financial reporting process.

Financial Reporting

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
1) Critically assessment of IASB's conceptual framework of financial reporting ....................3
2) Entities applying the appropriate concept / assumptions to prepare financial statement.......5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Financial reporting is essential to all organisation because it communicates financial
information to shareholders like customers, employees which helps to take decision regarding
investment their money into the company. Financial reporting includes income statement,
balance sheet and change in equity shareholders which prepare for management reporting for
internal decision management that helps to accomplish the goals and objective of the company
(Acharya and Ryan, 2016).
Present report includes the overview of IASB concepts and its objective of financial
reporting. further, fundamental concept and quality of financial reporting. It also explaining
about concept and principles are adopt by company while preparing financial statement of the
company.
TASK
1) Critically assessment of IASB's conceptual framework of financial reporting
Overview- International accounting standard board is an independent privately body.
IFRS (International financial reporting standard) issue by IASB which specify that company
must maintain financial report that disclose all information to public. IASB was formed in 2001
and currently 14 members present in this board.
IASB prepare common rules and accounting language which helps to provide accurate,
reliable, transparent information from company to company or company to world. Company
must prepare financial reporting by adopting concept and principle of accounting which is
formulated by board.
Objective of financial reporting -
Financial reports are prepared by all organisation which leads to achieve goals and objective
of the company (Adams, 2017). There are many objectives of preparing financial reporting-
 Financial reporting provides necessary financial information to manager which is require
for planning, decision making and setting benchmarking that helps to achieve stated goals
at the predetermine time.
 Company prepare financial report that shows all information and position to shareholders,
promoters which use to take decision related to investment and financial planning of the
company.

 Company can enhance social welfare to employees, community and social that helps to
boost morale and motivation. It is required for increase productivity and profitability of
the company.
 Financial reporting provides information to auditors that use to detect errors in
accounting.
Fundamental concept - Company accept all accounting concepts such as accrual concept,
going concern concept etc which is required for accounting. Company follow generally accepted
accounting principle on the time of accounting. Company can systematically maintain all record
and transaction that ultimately helps to preparing financial statement. Accounting is useful tool
which helps measure net profit and net loss of the company. Company use accounting concept
which use to preparing financial statement of the company which depict the financial position of
the company in the market.
Fundamental quality- Manager should adopt all principles or rule for preparing financial
reporting of the company that provide significant information to all customers, investors and
promoters. Financial report should be preparing qualitative and systematic way that represent the
clear picture of the company (Nielsen and Roslender, 2015). These qualities must content into
the financial reporting -
Understandability - Company's financial report represents clear information which is
understandable information to shareholders, customers. Report should not consist typical world
which create difficulties to understand information that helps to take decision.
Relevance- Manager must provide needed or relevant information to their user. It consists of
short and relevant information that helps to take decision for investment and financing decision.
Comparable - Report should in comparable form which use to provide financial information
to user that helps to analysis the performance and financial position of the company.
Timeliness- Company have to represent their accounts in the end of the years which helps to
provide information to user when they needed.
2) Entities applying the appropriate concept / assumptions to prepare financial statement
Recognition concept - Company adopt accounting concept because it concerned accrual
concept and matching concept. This accept generally accounting principle to recognise revenue
that use to critical situation occurrence. Company focus on payment rather than cash receivable
that

Measurement concept - It is essential concept of accounting that generally record cost of
all event and transaction which provide quantitative information (Martínez‐Ferrero, Garcia‐
Sanchez and Cuadrado‐Ballesteros, 2015). It used to measure that factor that leads to long term
changes which affect the financial position of the company.
Disclosure concept - It is important principle that are adopted by all companies because
they have to disclose all relevant information into the financial statement which helps to take
rational judgement. Full disclose means that disclose existing policies to member of the company
that helps to take decision for sustainable growth of the company.
Basic Assumption
Economic entities- These accounting assumptions represent that owner's entity is
separate from its business transaction. If any liability creates then company is liable to pay not
the owner of the company.
Going concern- company concern that they operate their business for the long-term
period or indefinitely period. when company prepare financial accounting then it assumption
taken by the manager so they can make accounts which helps to pay the debt.
Monetary unit - Company accountant report the assets amount rather than reporting of
the all assets (Koo and et.al., 2017).
Periodicity- If company conduct ongoing activity then they have to prepare financial
accounting in periodically basic such as monthly, quarterly and annually.
Accrual basic- company focus on this assumption that focus on cash payment rather than
cash receivable in financial year that helps to concern about the payment of debt or liabilities.
Example - manufacturing company provide product to customers that generate profit which
have to disclose info the financial report and also show all factors like debt, owners’ equity,
creditors and inventory and related cost show into the report. It helps to provide all information
to employees and shareholders.
CONCLUSION
This report summarised that company must prepare financial report by accepting ISAB
principles that provide necessary information to their user that helps to take decision for
investing money. It also concluded that accounting have many objectives that helps to represent
the financial position and provide all information to shareholders, customers etc. Quality
financial reporting must provide relevant information which helps to understandable and

comparable. Further, explained about recognition, measurement and discloser concept and take
assumption which followed by company for prepare accounts . Financial report helps to achieve
vision and mission of the company.

REFERENCES
Books and journal
Acharya, V. V. and Ryan, S. G., 2016. Banks’ financial reporting and financial system
stability. Journal of Accounting Research. 54(2). pp.277-340.
Adams, C., 2017. Understanding integrated reporting: the concise guide to integrated thinking
and the future of corporate reporting. Routledge.
Nielsen, C. and Roslender, R., 2015. Enhancing financial reporting: The contribution of business
models. The British Accounting Review.47(3). pp.262-274.
Martínez‐Ferrero, J., Garcia‐Sanchez, I. M. and Cuadrado‐Ballesteros, B., 2015. Effect of
financial reporting quality on sustainability information disclosure. Corporate Social
Responsibility and Environmental Management. 22(1). pp.45-64.
Koo, D. S and et.al., 2017. The effect of financial reporting quality on corporate dividend
policy. Review of Accounting Studies. 22(2). pp.753-790.
Online
Financial Reporting. 2019. [Online]. Available through.
https://www.edupristine.com/blog/financial-reporting.