INTRODUCTION
In 1975 the Corporate Report was published, this was the outcome from the Accounting Standards Steering Committee's wide ranging discussion paper and in part considered the usefulness of financial statements
(Dunn, April 2002) discusses that to meet their basic objective financial statements must be useful; and the information relevant and reliable. Information will have relevance if it influences the decisions of the users. Relevance and reliability are primary characteristics relating to content together with the threshold quality,materiality. The primary characteristics relating to presentation include comparability, clarity and understandability.
The Corporate Report in 1975 identified the major user groups listed below
…show more content…
They consider the following information for their use.
NRV (Net realisable value of company's assets)
Cash position of the company/business
Future cash positions (Projected cash flows)
Financial Viability of the company in future
The above mentioned information again can only be estimated by the group and does not give the creditor a clear foresight of the actual position the company will be in future.
EMPLOYEES This type of group requires information on the performance of the company for:
wage and salary negotiation;
Assessment of economic stability and future viability of the business.
In addition to the above they may require information which is
1. non-financial
2. non-technical (less jargon)
3. detailed information for a particular department/function or a geographical level (regional level)
The information thus provided in the financial statements is not of much relevance to the employees as they have other needs which are not fulfilled by the existing reporting format.
THE ANALYST ADVISOR GROUP
This group which is a collection of experts advising other groups like
Stockbrokers advising shareholders
Trade unions advising employees
Govt statisticians advising government
Thus the information present to them in the financial statements does not suffice their particular requirements and this group also need detailed information to perform their duties efficiently.
THE BUSINESS CONTACT GROUP This
Differentiate between the Generally Accepted Accounting Principles and the International Financial Reporting Standards for their impact on financial
The requirements of the applicable financial reporting framework relevant to accounting estimates, including related disclosures
To enhance a user’s ability to understand and compare an entity’s operating results, reporting entities are required to describe all significant accounting policies in their financial statements. As such to decide if an accounting principal is significant, is the management’s decision.
As the business environment grows and companies find new ways to expand into their respective - or even new – markets, it is important that reporting standards stay up to date with changes and continue to assist companies in providing their users with useful accounting information. Information is labelled as being useful when it meets the
CLASSIFICATION AND UNDERSTANDABILITY- FINANCIAL INFORMATION IS APPROPRIATELY PRESENTED AND DESCRIBED AND DISCLOSURES ARE CLEARLY EXPRESSED .
The second section of this report looks at the first recommendation which suggests firms to report different set of accounting information for its different users. Professional investors are very critical of the two approaches put forward as they do not want exclusion on financial information. The third section of the report looks at the second recommendations on how auditors can play a significant role in encouraging firms to omit immaterial disclosures. Profession investor can rely on auditor’s notes on materiality of financial disclosures when making financial judgments however there are still questions on what is thought to be material. The final part of the report
Another critical requirement for users of financial statements is information, this is addressed through the disclosure of certain principles, policies and procedures to facilitate decision making, which current standards don’t adequately address, hence the issuing of AASB 15. (AASB,2014) Accordingly, a new standard is required to rectify the inconsistencies of revenue recognition and address the lack of consistent and useful information.
These characteristics can enhance relevant and faithfully represented financial information. Comparability can help users find similarities and differences among events and conditions. Verifiability implies a consensus among different measurers. Timeliness is very important, if information is timely, it can help users to make a decision as soon as possible. Understandability is used to measure whether the financial information is categorized and presented in a clarified and concise way for users to understand easily. (IASB 2010)
• A further weakness is that the accounting department issues reports that only indicate how each area operates, rather than evaluating the performance of each area, which would prevent a constriction in cost efficiency. These weaknesses prevent JDCW from accurately accessing its true costs.
• A further weakness is that the accounting department issues reports that only indicate how each area operates, rather than evaluating the performance of each area, which would prevent a constriction in cost efficiency. These weaknesses prevent JDCW from accurately accessing its true costs.
Information given by an entity 's financial performance grant users of the financial statements to assess:-
The country selected for this study is the United Kingdom (UK). UK Generally Accepted Accounting Practice (GAAP) has been in place for a long period of time and was harmonized in 2005 so as to comply with the international accounting standards. The UK embraced the principles of the International Financial Reporting Standards (IFRS) in 2005 after the European Union (EU) mandated that all members that were publicly listed companies be subject to reporting under the International Accounting Standards (IAS). This was to help facilitate that those listed companies could easily be compared to onr other on their performance and transparency was improved since they were now subject to the same principles of reporting. Companies in the United
Vital Information gained from financial reports and annual reports provided by the company will aid in determining a strategic plan to
The Financial Accounting Standards Board has issued for public comment two Exposure Drafts related to its disclosure framework project. The first exposure draft proposes amendments to Statement of Financial Accounting Concepts - Conceptual Framework for Financial Reporting, Chapter 3 – Qualitative Characteristics of Useful Financial Information. The purpose of this proposed amendment is to clarify the concept of “materiality”. FASB defines materiality as, information is material if omitting it or misstating it could influence decisions that users make on the basis of the financial information of a specific reporting entity. In other words, materiality is an entity-specific aspect of relevance based on the nature or magnitude or both of the items to which the information relates in the context of an individual entity’s financial report. Consequently, the Board cannot specify a uniform quantitative threshold for materiality or predetermine what could be material in a particular situation.
Based on the financial ratios given, this section will compare and contrast the financial strengths of Company X and Company Y in order to suggest Tringale Ltd to take decision regarding which of the above companies to chose for investment. This section provides comments on financial performance areas based on the data given, and presents report to the Board of Directors of Tringale Ltd by recommending which of the two investment opportunities is better.