This assessment will cover certain questions which are like:
- What is the purpose of financial reporting
- What are the regulatory areas and the key principles through qualitative nature for financial information?
- What are the objective and the statement for the financial position?
Accountancy firm worldwide needs to implement effective financial accounting practice that can be required to eliminate 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 hurt organisational growth. The discussion has been made on the purpose and context of financial reporting, the regulatory and conceptual framework of financial reporting and the 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 better management of financial aspects of business organisations. Financial reporting can help offer useful and relevant information to the leaders and owners of a business organisation. To get effective control over the company, the organization needs to adopt better management of financial reporting. The needs and demands of the 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). An accurate financial statement helps both shareholders and lenders to make effective decisions about efficient resource management. The objectives of the financial statement include ensuring future growth, reinvesting in profit generation, focusing on capital generation, and mitigating liabilities. Scandal in the modern business organisation is a major barrier to successful business growth. There has been a proliferation of accounting scandals in modern business companies.
The proliferation of scandals relating to 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. International business 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 with 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 scenarios needs to be eliminated by the introduction of setting a standard financial reporting. It needs to be considered that there are particular requirements in the management of finance in the business organisation. Thus, relevant rules and regulations regarding financial reporting can have a better impact on overall accounting. There are corrupt practices in businesses that are responsible for such rampant scandals. The main purpose of financial accounting is to bring transparency to the accounting system. Modern financial reporting generally focuses on innovative technologies for the enhancement of better financial reporting.
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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 the 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 statements for maintaining an accounting standard in the business organisation. As recommended by Lang and Stice-Lawrence (2015), to ensure uniformity in the 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, and 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 the development and publishing of accounting standards in the interest of customers. Preparation of financial statements 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 statements. 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 the knowledge of common employees need to be evaluated for achieving a better result of an effective financial accounting system. As recommended by Graham et al. (2017), the power of business organisations can differ from one business organisation to another. Thus, financial managers need to consider the factors of each organisation while developing financial reporting statements. 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 the identification of an accounting system and the determination of objectives and scopes of that standard. To identify accurate financial statements in the business organization, there is a requirement for standardisation and also the establishment of priority for addressing 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. To exercise provisional powers in accounting practices, the accounting managers can implement sufficient and reliable practices.
There can be the implementation of better accounting standards which helps in process of standardisation. Companies act of 2006 helps in the establishment of a duty of an accountant. IAS regulation further guides the effective management of regulatory authorities. The management of the organisation can allow stakeholders to make efficient decision-making procedures. Incorporation of additional procedures in the accounting system can provide issuing of a particular accounting standard. Most relevant accounting standards adopted by financial regulatory authorities include disclosure of the accounting policies, construction of contracts, and accounting for 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 help make a better relationship with potential investors, creditors, and lenders. As argued by Situmeang et al. (2018), an aspect of economic claims and resources needs to be considered for assisting an effective system of financial performance management. To evaluate the solvency and liquidity of the accounting practice, the accountant can help the prediction of economic statements for the future perspectives (Marin, 2017). Management of economic resources can help obtain 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 statements can be very relevant in assessing faithful and relevant representation of the financial statement. Characteristics of an 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 the management of financial statements needs to be evaluated to bring a difference in the decision-making ability of the users.
Maternity can be considered as one of the entity-specific aspects of relevance and it is generally based on the 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 making the most appropriate decisions in accounting management purposes. Faithful representation in accounting practice helps in the representation and identification of underlying characteristics of neutrality, freedom, and completeness from error. Support of natural depiction can assist in the exercise of prudence. Prudence, on the other hand, is considered an exercise of caution. The caution is made when an accountant makes a judgement under uncertain conditions. As opined by Ali et al. (2016), the application of qualitative characteristics helps in the collection of faithful and relevant representation of information. 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 the enhancement of relevant and useful information to the targeted user (Kastrati, 2015). The factor of compatibility can be further useful for the identification and understanding of similarities and differences in the enhancement of useful information such as items. Rapid changes in the world market have necessitated accountants to adopt different management systems.
Cost can be a pervasive constraint in spreading 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 to benefit the process of information reporting. There are specific elements in process of financial reporting. The elements can be essential for reporting transaction effects and also the classification of economic characteristics into a broad group. The important elements of the financial statement include liabilities, assets, 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 conditions help in the generation of expected flow in the generation of the economic entity. Liability in financial management needs to be considered for determining the expected outflow of resources from the entity. As recommended by Christiaens et al. (2015), 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. Global investors can consider all these aspects of accounting practices for bringing improvement in the measurement of performance (Andrew, 2015). The value or cost of a 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, multiple stakeholders 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 unions, 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.
Better financial management in the organisation would benefit the government, as it would impact the collection of taxes. An effective and efficient system of tax collection in the business organisation help in an 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 the improvement of profit and it can ultimately improve the condition of the employees through better wages. 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 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 the 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. Ethics in financial practices assists 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. 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. 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 contracts, liquidity, and credit score. A better credit score can contribute to the management of an effective system in the business scenario. Better protection of management skills can be required for the evaluation of job involvement. A better management practice can promote effective and efficient accounting practices. The community member in accounting practice can help promote better management of the trader community. As recommended by Aletkin (2014), trade unions are responsible for promoting the offer of an effective management system. Good financial reporting and accounting systems in the business organisation can contribute to better time management. Time can be managed very effectively 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 systems. 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). 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 shareholders for initiating accounting decisions. A regular meeting with the stakeholder can ensure that the shareholders are going in their proper direction in a 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. Effective and better communication with the shareholders can help understand different grievances of the shareholders regarding financial reporting.
4. Value of financial reporting for meeting objectives of the organization and its growth
Financial reporting in business organisations is associated with value generation. The value in the organization can promote the generation of trust, and belief. Transparent financial reporting assists in the promotion of transparency. Transparency in the business organisation can be further helpful to enhance financial performance. The better management of accounting in the business organisation is believed to increase both brand recognition and value generation. Customers are attracted to an organisation that offers ethical responsibility to 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 certain factors 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.
Better ratio management further is helpful for the prevention of extra costs. Financial reporting contributes to the effectiveness of a better business scenario. To analyse a current aspect of financial effectiveness, the management of business organisations encourages the 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 utilises each of the factors for bringing improvement in financial analysis. Liquidity in the organisation is referred to as an integral factor that can allow meeting existing obligations of the organisation and offer the company opportunity of providing better opportunism. As recommended by Olibe (2016), the promotion of an effective management system in the organisation needs to be improved for adding value. The cash flow of a 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 factors (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
To make a presentation of the loss or profit section, there is a requirement of minimum items. The items include finance cost, revenue, tax expense, a 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 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, and raw materials. On the contrary, the function, in this case, refers to administrative, costs 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 from the income. The income needs to be attributable to the interest of the owners.
There is a specific effect of retrospective application from the restatement or policies of accounting. The retrospective statement is made by 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 the period end and the beginning of the carrying amount. It is done based on an individual component of the equity (is a plus, 2018). It further helps in the disclosure of loss or profit, other comprehensive income, and also transactions with the owners for purpose of showing separate contributions by distribution to the owners and also interest changes in ownership. Comprehensive income analysis requires close attention to an item that is required for the presentation of the statement in notes.
In the face of state changes, certain factors can determine the 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 statements for financial positioning, and separation of non-current and current assets and also liabilities. The financial positioning is also required for presentation based on provided liquidity information (Refer to Appendix 2). Separation of the long-term amount in the financial sector can be further helpful for the realisation of expectations in the current scenario (is a plus, 2018). There is a requirement for a current asset because it can help the realisation of the expected outcome in the business scenario. It can further assist in holding trading purposes responsible.
d) Information on the 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 (is plus, 2018). Items of expenses and income can be evaluated for the determination of required losses and profits. To provide a better analysis of income generation, it can be vital to integrate transactions of the vent to determine equity share. On the contrary, it is crucial to consider reconciliation between the profit and loss by comprehensive income generation.
From the above-stated context, it is clear that financial reporting is helpful for the prevention of corruption in business organisations. Increased competition in the business organisation worldwide requires close attention by the financial management. Increasing competition in this field makes students work tuff, often they face problems when they are given to write an essay on finance topics, and because of the updating and competitive environment, they find it difficult to research and write down for the same. But Instant Assignment Help Australia tackle and absorb all the load of the students and get their work done by expert writers when it comes to Finance Essay Writing Help.
It can be concluded that an 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 close attention by the financial management. To improve better management of business scenarios, 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.
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