International Financial Reporting: HSBC Governance and Analysis

This report provides a comprehensive analysis of financial reporting, focusing on governance, regulatory frameworks, and the application of International Financial Reporting Standards (IFRS). The study examines the financial reporting practices of HSBC, a multinational investment company, and int...Read More

International Financial
Reporting

Table of Contents
INTRODUCTION...........................................................................................................................3
LO 1.................................................................................................................................................3
P 1. Analysing the financial reporting including governance of financial reporting and
regulatory framework...................................................................................................................3
P 2. Purpose of financial reporting in order to meet organizational objective............................4
M 1. Analysing the purpose of financial reporting in order to meet stakeholder’s expectations.
......................................................................................................................................................5
D 1. Critical analysis on different governance of financial reporting and regulatory framework
for stakeholders............................................................................................................................5
LO 2.................................................................................................................................................6
P 3. Interpreting income statement, cash flow and balance sheet................................................6
P 4. Calculating financial ratios of the organization....................................................................6
LO 3.................................................................................................................................................6
P 5. Benefits of IAS and IFRS.....................................................................................................6
P 6. Models of financial reporting and auditing..........................................................................7
M 3. Critical evaluation of financial reporting and auditing with the application of models and
theories.........................................................................................................................................7
LO 4.................................................................................................................................................8
P 7. Importance and difference of financial reporting across various countries..........................8
M 4. Critical evaluation of the various factors which influences international difference in
financial reporting........................................................................................................................8
D 3. Critically evaluating the application of IFRS to specific countries and difference in
financial reporting in relation with various theories and models. ...............................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Financial reporting is referred to as the communication of financial information which
helps in making strategic decision. International financial reporting Standards (IFRS) is known
as an accounting standards which are issued by the International Accounting Standard Board and
IFRS foundation. It helps in providing common set of rules and language in order to be
transparent, consistent and comparable across various international boundaries. This study will
focus on critically analysing the financial reporting in relation with governance of financial
reporting and regulatory framework. It will further interpret the financial statements of the
company and calculate financial ratios in order to gain wider perspective on the performance of
the company. This study will also highlight on the benefits of IAS and IFRS by critically
evaluating the various models of financial reporting. Lastly, it will demonstrate the importance
of financial reporting across various countries in international borders. HSBC is a multinational
investment company which was established in the year 1865 by Sir Thomas Sutherland. It
mainly deals in various financial services.
LO 1
P 1. Analysing the financial reporting including governance of financial reporting and regulatory
framework.
Financial reporting is referred to as the communication of financial information which
helps in making strategic decision. Financial reporting includes income statement, cash flow
statement, shareholders equity statement and balance sheet statement. International financial
reporting is useful in providing common set of rules and language in order to be transparent,
consistent and comparable across various companies in international boundaries. Financial
reporting is very useful in effectively analysing the owner's equity, liabilities and assets of the
company in order to make resources available for the future growth and sustainability (Thomson,
2015). It is very useful in harmonising the international and national standards by using the
same regulatory standards (Biondi, 2016). The key purpose of financial reporting is to critically
analyse, track and report the business data in an appropriate and efficient manner. This in turn
helps in enhancing consistency and accuracy in the preparation of financial statements. The
International Accounting Standard Board (IASB) states that the main objective of the financial
reporting is to effectively provide financial information that is very crucial for the lenders,
investors and creditors. They focus on setting common rules in order to effectively comply with

various international standards in order to make strategic decision for higher sustainable growth
and development of the company. These principles were set by UK financial reporting council
(FRC). The financial accounting principles are contained in UK GAAP which is useful in
guaranteeing accuracy and consistency in financial reporting. This in turn helps company to
effectively secure the trust of stakeholders and investors. The aim of these financial reporting
standard is useful in organizing all the information of the company in such a way that it makes it
easier for the independent observer to effectively interpret the data. Information should be
comparable as it helps in effectively comparing the financial data of similar entities
(Abdelhamid, 2017). Conceptual framework for financial reporting is very useful in preparation
of financial statements. Governance of financial reporting is useful in effectively disclosing all
the relevant information for the stipulated period. UK companies who are listed on the European
Union regulated market are needed to prepare their financial reports with IFRS adopted by EU.
Regulatory framework in financial reporting is useful in increasing the confidence of the users in
the financial reporting process. It is very useful in regulating the behaviour of the directors and
companies towards their investors. United Kingdom has its national financial reporting authority
i.e., Accounting Standard Board is the one who issues financial reporting standards in United
Kingdom. Regulatory framework is required to prepare the financial statements as it helps in
regulating the behaviour of the companies, increase users confidence and is also very useful in
providing relevant information (Singh, 2016). The key principle of regulator framework in
financial reporting is that it helps in providing relevant and reliable financial information. The
key principles includes measurement, presentation, recognition and disclosure of all the material
items in a systematic manner in financial statements.
P 2. Purpose of financial reporting in order to meet organizational objective.
The key purpose of financial reporting is to critically analyse, track and report the
business data in an appropriate and efficient manner (Knudsen, 2017). The key purpose of the
financial reporting is to critically examine the financial health of the company, business
performance, resource usage and cash flow analysis in order to make informed decision in an
efficient and accurate manner. It is very useful in critically analysing whether the business is
making profit or loss. It helps in determining which part of the business is making efficient
profit. Compliant financial reporting is useful in providing objective insight on the economic and
financial situation of the company. This is also very useful in optimization and tax planning. The

balance sheet of the company is useful in determining the financial position of the company
which in turn acts as a basis for resource allocation and financial planning. The UK GAAP has
six standards i.e., FRS 100, FRS 101, FRS 102, FRS 103, FRS 104 and FRS 105 in order to
effectively govern with financial statements in the UK (Accounting principles: National and
international standards, 2018.). Additionally, Statement of Recommended practice (SORPS) and
UK financial reporting standard for smaller entities (FRSSE) helps organization within specific
sector or industry. The data should be transparent which helps observer in critically evaluating
all the relevant elements. It is very useful that the information should be relevant and must be
free from biasses in order to make accurate decision. Companies who are listed on the securities
traded market tends to comply with International Accounting Standard (IAS) Regulation.
Financial reports have to effectively adhere with the accounting, legal requirements and
accounting which can be effectively understood against various international boundaries (Abed,
Al-Najjar and Roberts, 2016). Financial reporting is very useful in making strategic decision. It
is very useful in predicting the current financial position in order to attain higher organizational
goals and objectives.
M 1. Analysing the purpose of financial reporting in order to meet stakeholder’s expectations.
Effective, relevant and accurate financial reporting is very useful for the managers,
investors and other stakeholders in order to make strategic decision.
Investors: It helps investors to critically analyse the amount of cash that has been
reinvested into the organization (Burrows, Low and Cumming, 2015). It is also useful in
evaluating the efficiency of the capital that has been utilized in order to make necessary decision
in a systematic and appropriate manner.
Managers: Financial reporting helps managers in determining the financial position and
financial performance of the company. It is very useful in critically analysing whether the
business is making profit or loss.
Employees: Financial information helps employees in predicting the organizational
growth in order to take decision regarding career opportunities and development.
D 1. Critical analysis on different governance of financial reporting and regulatory framework
for stakeholders.
Robertson and Samy, (2015) sought to determine the fact that, financial reporting is very
crucial for both internal as well as external stakeholders of the company which helps in making

critical decision in a systematic and appropriate manner. Managers use financial reports to
formulate plan, coordinate and control various business activities to make informed decision.
Sovbetov, (2015) argued that, Employees use financial reporting in order to determine the
growth and career development of an individual. It helps investors in making informed decision
related with the investment in order to make effectively invest their money in right direction
LO 2
P 3. Interpreting income statement, cash flow and balance sheet.
P 4. Calculating financial ratios of the organization.
LO 3
P 5. Benefits of IAS and IFRS.
International Accounting Standards (IAS) is useful in synchronizing all the activities in a
presentable and effective manner. It is useful in setting guidelines for proper presentation of
financial statements (Fletcher, 2018). These are prepared by effectively using various concepts
which mainly includes going concern concept and accrual basis concept. This is prepared
consistently across various accounting periods. On the contrary, International financial reporting
standards are useful in contributing to economic efficiency and sustainability. The main purpose
of IAS in order to ensure that the various international centres in the world must focus on
effectively using global reporting framework in order to maintain proper regulation of financial
market. On the contrary, International financial reporting helps investors in effectively
determining the risk and opportunity factors in order to improve the capital allocation. Adoption
of globally accepted common language adds to greater efficiency for the less developed
countries. It is very useful in lowering the cost of capital and enhancing operational efficiency,
performance and profitability of the business (Conlon, Ladher, and Halterbeck, 2017). IFRS
standards is very vital for the regulators across the globe. It helps in strengthening the
accountability of the data by effectively reducing the information gap to the various users. IFRS
is very useful in international comparability and the quality of financial information. This is very
useful in making informed decision. It helps in contributing to economic efficiency as it helps in
investors in identifying various opportunities and risk. IFRS are of vital importance to regulators
across the globe.

P 6. Models of financial reporting and auditing.
The financial reporting model is referred to as the blueprint of various structure and
financial reports which are effectively issued by the government. Financial report auditing is
useful in effectively determining whether the financial statements have been prepared in an
ethical and reliable manner (Nawaz, 2019). It is useful is disclosing all the relevant information
by presenting fair data.
IFRS: International financial reporting standards is useful in effectively increasing the
quality and comparability of the financial statements. IASB focuses on reducing the cost of
capital to the business and is also removing barriers to invest in various international market.
IFRS are useful in contributing to economic efficiency and sustainability of the business by
critically identifying various risk factors. It is very useful in higher transparency, comparability,
consistency and reliability of the financial reports.
GAAP: Generally accepted accounting Principles is helpful in setting accepted standards,
procedures and accounting principles which companies must effectively follow while making
financial statements for the particular set accounting period.
EU GDPR: General data protection regulation helps in protecting all the necessary
information. It helps in maintaining privacy and protecting data from getting lost.
Auditor's reporting model helps in keeping auditor's opinion in order to effectively
comply with company's financial statements (Mason and Harrison, 2015). It is very crucial to
maintain an audit report because it is useful for banks, investors, regulators, government and
creditors.
M 3. Critical evaluation of financial reporting and auditing with the application of models and
theories.
Elbakry and et.al., (2017) said that, financial reporting and auditing in compliance with
various financial reporting models such as GAAP, IFRS, GDPR and accounting theories is
useful in making comparable, transparent and reliable accounting information. These are the
specific standards which helps in maintaining systematic record of the financial information.
Auditor's reporting model helps in keeping auditor's opinion in order to effectively comply with
company's financial statements. It is very crucial in determining whether the particular financial
statements have been complied with particular set standards or not.

LO 4
P 7. Importance and difference of financial reporting across various countries.
Implementation of International financial reporting standards is useful in improving the
quality of the accounting and financial information. It is very useful in reducing risk and
ensuring transparency and consistency. It is very useful in bridging the gaps between developed
economies. Financial reporting is very useful in improving the debt management of the
company. It helps in tackling any potential weakness which in turn is very useful in improving
the overall health of the company. It is very useful in managing the liabilities of the business and
will help managers in taking accurate and informed decision regarding the performance and
profitability of the business. Application of IFRS in United Kingdom helps in maintaining high
quality of standards across various international boundaries in order to improve the transparency
and comparability of the various financial information (Agyemang-Mintah, and Schadewitz,
2018). The key reason for difference in the financial reporting of the government is that there is a
large level of interference by the government in accounting. Australia comply with Australian
accounting standard board in order incorporate with the conceptual framework of financial
reporting. In India, the financial reporting and standards comply with GAAP and IAS in order to
produce relevant and reliable information.
M 4. Critical evaluation of the various factors which influences international difference in
financial reporting.
Adeyemi, (2018) said that, degree of government interference in various international
boundaries results in international difference in financial reporting. A financial reporting is
mainly affected by the economic, cultural and professional interference which in turn largely
influences the financial reporting at international borders (Dhingra, and et.al., 2016). Political
and international relationship with the country leads to difference in financial reporting.
Country's legal system also has a direct impact on the accounting system of the country. Other
factors like taxation, inflation, cultural factor results in international difference in financial
reporting.
D 3. Critically evaluating the application of IFRS to specific countries and difference in financial
reporting in relation with various theories and models.
Lang and Stice-Lawrence, (2015) said that, application of IFRS in UK helps in keeping
financial statements in reliable and efficient manner. It is very useful in keeping the financial

information transparent and comparable. Application of IFRS in India is based on providing all
the financial information which in turn helps in effectively synchronizing the data in a systematic
and efficient manner. ICAI is an effective body which helps in implicating IFRS standards in
order to achieve high operational growth.
CONCLUSION
From the above conducted study it has been concluded that, international financial
reporting is vital to critically examine the financial health of the company, business performance,
resource usage and cash flow analysis in order to make informed decision in an efficient and
accurate manner. It helps in maintaining records in an appropriate and reliable manner. It has
been determined that, relevant and accurate financial reporting is very useful for the managers,
investors and other stakeholders in order to make strategic decision. This study will further,
interpreting income statement, cash flow, balance sheet and financial rations of the company.
Furthermore, this study highlight on the benefits of IAS and IFRS. Furthermore, this study helps
in demonstrating the importance and difference of financial reporting across various countries. It
has been identified that, degree of government interference, political and international
relationship, taxation, inflation, cultural factor results in international difference in financial
reporting.

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Online
Accounting principles: National and international standards. 2018. [Online]. Available through:
<https://www.ionos.co.uk/startupguide/grow-your-business/accounting-standards-of-the-
ifrs-and-fasb/>