Financial Analysis : Financial Accounting Standards Board

1606 Words Oct 3rd, 2015 7 Pages
According to the conceptual frameworks used by both the Financial Accounting Standards Board and the International Financial Standards Board, one of the main reasons why companies prepare financial reports is to allow users of financial statements make decisions regarding the provision of resources to the firm (Financial Accounting Standards Board, 2010; International Financial Standards Board, 2010). These decisions relate to the buy, sell, or hold moves that investors make based on the information received from the company. Both conceptual frameworks also include credit investors as being interested in the company’s performance as reflected in the financial reports. Apart from proving information to investors on the company’s projected cash flows, financial statements also play the important role in enhancing stewardship responsibilities that rest with managers. These requirements have connotations of financial statements being relevant to the targeted audience. In addition, financial statements are expected to be reliable from the audience’s viewpoint.
According to Ronen (2008), financial statements allow shareholders assess how well the company’s managers performed over the most recent period as compared to previous years and other companies within and outside the industry. This view is supported by the conceptual frameworks, which argue that companies provide general financial statements for the purposes of enabling shareholders and other interested parties assess the…
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