Financial Reporting: Framework, Elements, and Accounting Standards

This report provides a comprehensive overview of financial reporting, starting with an introduction that defines financial reporting as the effective communication of fiscal information to stakeholders. It delves into the conceptual framework published by the International Accounting Standard Board (IASB), emphasizing its role in ensuring accuracy, consistency, and the development of valuable financial statements. The report highlights the importance of relevance and faithful representation in financial reporting, along with the objectives of providing information on cash flows and economic resources. Task 2 discusses essential elements in preparing financial statements, including recognition, money measurement, and disclosure concepts, along with basic accounting assumptions like going concern, economic entities, accrual basis, and periodicity. The report concludes by summarizing the key takeaways, emphasizing the systematic approach of financial reporting and the significance of accounting concepts and assumptions in preparing and presenting financial statements for informed decision-making. The report includes a list of references to support the information presented.

Financial Reporting

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Conceptual Framework................................................................................................................1
TASK 2............................................................................................................................................2
Elements in preparing financial statements.................................................................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
In business scenario, the term financial reporting is defined as the process of effective
communication of important fiscal information such as annual statements to different stakeholder
so that current status and strength can be viewed by them to make meaningful decision (Ball,
2013). In general, anything that could be convey financial information to the number of
shareholder is considered to be a kind of financial reporting.
TASK 1
Conceptual Framework
The International Accounting Standard Board has published conceptual framework to
make accuracy in financial reporting that includes the exact and authentic definition of liability
and assets it also provide the new guidelines on measurement, presentation, recognition and
disclosure. These framework conform to make sure that different accounting standard consist of
various approaches that can be used to resolve the problems that are not being addressed directly
within a standard. It assists the IASB for the better development of consistent and coherent
accounting standard that further support to prepare valuable financial statements so that user are
able to understand the purpose, concept and limitation of financial reporting. The framework has
to consider that is meant by the usefulness of information which consist the both relevance such
as user are capable to make a differences in the decision and the truthfulness in the presentation
of accounting information i.e must be complete, free from any type of error and neutral.
Basic objective of financial reporting: The main objective of financial reporting are
described below:
 It provide faithful information about the overall companies cash flows with the exact time
and other uncertainty of cash inflows and outflows. This is one of the main information
as it help in ascertaining the actual liquidity of a firm so that it can continue as a going
concern (Arouri, and et.al, 2012).
 The main objective is to provide valuable information to the user of report. So these
information could be used for number of purpose like to deliver credit facilities to clients,
either to lend monetary terms and the most important either to invest in company or not.
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 The disclosure of the obligation and economic resources of a business firm that mainly
emphasis on the alternation in liabilities and resources that help to forecast upcoming
cash flows.
Fundamental concept:
In present era, the main objective of accounting is related to the accumulation and
reporting of useful fiscal information that discloses the overall performance, financial position
and current cash flow of a business. Then the provided financial data is used to make meaningful
decision in order to manage, run a specific business or either to make investment or lend some
money. These business decision mainly involves buying, selling and holding debt and equity
documents so that proper setting of loans and other form of credit are provided to the user. It is
observed that a business firm recognised its liabilities from the statements when it responsibility
is spoilt from statements and remove assets when its contractual right related to the assets cash
flow expire. All the financial assets and liabilities of an entity are recorded and measured at their
fair values presented in annual statements (Bushman and Williams, 2012).
Fundamental quality of financial reporting:
 Relevance: In general accounting term, relevance means all those item presented within
statements must provide useful information about the companies financial position and
strength in an accounting year. Thus it support the user to make differences while making
useful decision as it consist predictive and confirmatory values.
 Faithful Representation: It is the second most important fundamental qualitative
features of financial report as these reports represent the economic phenomena of
company in words and number. Thus the presented information in annual report must
represent the purpose and meaning of such as actual position of assets and liabilities and
overall position of income and expenses. There are mainly three characteristic of faithful
representation that are completeness, neutrality and free from error.
TASK 2
Elements in preparing financial statements.
In accounting, the essential rules of accounting that must be followed while preparing of
annual accounts and statements. This help to provide quality, reliable, accurate and timely
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information to stakeholder in order to make meaningful decision. Some of the basic concept and
assumption are discussed underneath.
Recognition concepts: It is referred as the act of involving a business transaction within
a financial statements that can be either balance sheet or income statements. The recognition of
total expenses and revenues are founded on the matching principle of accounting.
Money measurement concepts: In the business firm the entire accounting procedure
records only those activities which could be expressed in the monetary values rather than some
exception. This simply means that the focus of accounting transaction in a company must be
quantitative rather than qualitative (Martin and Roychowdhury, 2015).
Disclosure Concepts: The full disclosure concept mean that management has to report
each type of relevance information about the firm operation to the significant creditors and
investor. For example, the net profit and total income and expenses must be recorded in financial
statements of a company.
Basic assumption of accounting are:
Going concern: As per this assumption, the financial statements of a business firm will
assume that organisation have followed the concept not to wind the business operation in near
future.
Economic Entities: It is an accounting rule that abstracted the business transactions that
are carried out by a firm and their management. This assumption could be applied to various
divisions in a same organisation.
Accrual Basis: It is method of reporting each transaction for income when these are
earned and expenses at the time when these are incurred.
Periodicity: This assumption states that a firm can report annual fiscal outcome within
definite selected time frame. It simply means that an organisation systematically reports their
cash flows and other useful result on a monthly, quarterly, or annual basis.
CONCLUSION
In this report, it has been concluded that financing reporting is a systematic approach to
record and present useful information to stakeholder in order to make meaningful investment
decision. There are different concept and assumption of accounting that support companies to
prepare and represent the statements in most appropriate manner.
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REFERENCES
Books and Journals
Ball, R., 2013. Accounting informs investors and earnings management is rife: Two questionable
beliefs. Accounting Horizons. 27(4). pp.847-853.
Arouri, M. E. H. And et.al, 2012. Relevance of fair value accounting for financial instruments:
some French evidence. International journal of business. 17(2). p.209.
Bushman, R. M. and Williams, C. D., 2012. Accounting discretion, loan loss provisioning, and
discipline of banks’ risk-taking. Journal of accounting and economics. 54(1). pp.1-18.
Martin, X. and Roychowdhury, S., 2015. Do financial market developments influence
accounting practices? Credit default swaps and borrowers׳ reporting
conservatism. Journal of Accounting and Economics. 59(1). pp.80-104.
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