Quality Of Financial Reporting And Disclosure Requirements Essay

Quality of reported financial information is a critical element in evaluating financial statement data. The higher the quality of financial reporting, the more useful the information is for business decision making.

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

The most important thing to any company’s stakeholders is high-quality reporting of its financial statements. Investors, for instance, need to know the truth about a company in order to make an informed decision on whether to make private investment, buy stock or bonds. However, for stakeholders to get the truth about a company, they need to read and understand management’s discussion and analysis, the president’s letter, the notes, as well as the financial statements. Conversely, financial statements must be accompanied with disclosures to prevent them from misleading the stakeholders.

When organizations present financial statements for review, the information contained in the statements should be appropriate and clear enough as to enable evaluators or auditors of the information to make accurate estimations of the presenting organization’s financial status.

States. Companies should report income, liability, equity, and assets. Many people (stockholders, investors, etc.) who have a stake in the company want to know this information before providing a service. In this paper, International Financial Reporting Standards (IFRS) and the Generally Accepted Accounting Principles (GAAP) will be compared for

Representations are faithful if there is a correspondence or agreement between the accounting measures or descriptions in the financial reports and the economic phenomena they purport to represent (FASB, 1980: 6; FASB, 2005: 3). The difference between reliability and a faithful representation is ambiguous. Since the attributes neutrality, completeness and substance of economic phenomena (substance over form) can be classified as qualities of faithful representation, reliability becomes redundant. Consequently, a point of attention is to discuss what exactly the notions reliability and faithful representation mean and what they do not mean (FASB, 2005: 2-3).In both frameworks neutrality is defined as free from bias. 'To that end, the common conceptual framework should not include conservatism or prudence among the desirable qualitative characteristics of accounting information. However the framework should note the continuing need to be careful in the face of uncertainty' (FASB, 2005: 3).

This report is written as a response to the monograph in which the ICAEW published on how financial accounting disclosures can be improved. The aim of this report is to critically discuss and evaluate the worthwhileness of the recommendations made from a financial investor’s perspective. It is done by reviewing recommendations put forward by the ICAEW and analysing if each of the disclosure recommended is worth the effort while putting in perspective what effects these recommendations have on professional investors who are one of the primary users and consumers of financial statements. The report contains information mainly from the ICAEW report and the CFA institute report

IASB. 2010, "The Conceptual Framework for Financial Reporting" IFRS, pp. A21- A38, viewed 23 April 2014,

As a result of financial fraud disasters such as Enron, WorldCom, and AIG there has been a growth in the past decade of how companies conduct full disclosure reporting. Enron, for example, misinformed and manipulated financial information to users of losses of its fiscal year statements. These scandals of fraud have also caused the Securities and Exchange Commission (SEC) to enforce strict rules of a company as it relates to the disclosure of reporting financial information. The SEC is also responsible for how a company discloses information in financial statements. The SEC requires corporations to employ complete interim data of notes to financial statements in a timely manner. These notes must be precise and accurate the first time to assure users of statements confidence. The SEC’s interest is to ensure corporations reveal required expanded data to users of financial statements. Without these enforcements of provisions, and contractual obligations, corporations are capable of omitting required information that results in scandals such as, Enron, WorldCom, and AIG corporations. Under the provisions of the SEC, the failure of a company to disclose required data in financial statements can result in serious consequences. The Financial Accounting Standards Board (FASB) also plays a role in the growth of how corporations conduct financial reporting. The

Total assets at the end of its most recent annual reporting period? Why is this important?

Main Features of this Pronouncement Application Date This pronouncement makes amendments to the Framework for periods ending on or after 20 December 2013, with allowance for earlier application. AASB CF 2013-1 4 PREFACE  Main Amendments This pronouncement replaces the guidance in the Framework on the objective of general purpose financial reporting and the qualitative characteristics of useful financial information with, as an integral part of the Framework, the Appendix: Objective and Qualitative Characteristics.

Financial Statement is the heart and soul of the business industry as it provides the financial condition of the company and the going forward initiatives of the corporation, therefore it is critical that the financial statement is free from manipulation and misstatement to be material and useful for stakeholders and other earning statement users. Goel and Gangolly (2012) implied that top management knows the financial statement users will perceive the audited report as credible, and strategically writes under thorough guidance of corporate lawyers to cautiously position the company’s image positively (p.75). Goel and Gangolly argued that not only the financials metrics, but disclosure statements contain “linguistic cues” for investigation of accurateness and honesty of the writing and presentation style (p.75-76). Financial statement fraud has become a growing problem in the accounting profession and the business industry. According to Committee of Sponsoring Organizations of the Treadway Commission (COSO, 2010) 1998 to 2007 fraudulent financial reporting statistics, over 60% of the fraud cases were revenue fraud (p.5). Abbasi, Albrecht, Vance and Hansen (2012) emphasized the harmful effect of financial fraud to our economy, specifically to risk-averse investors, which could have crucial long-term consequences to company’s sustainability (p.1293). Abbasi, Albrecht, Vance and Hansen indicated that most companies that were

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.

Financial Statements basically show the historical performance or record of the company at some previous point of time. By the time when financial statements are made public, changes are many economical areas such as market conditions, currency exchange rate and inflations can change the values of assets and liabilities. In this case there often exist discrepancies between book value of assets and their market values.

The Purpose of Financial Statements The financial statements of a business are used to provide information about the status of the business, set performance targets and impose restrictions on the managers of the firm as well as provide an easier method for financial planning. The financial statements consist of the Profit and Loss Account, Balance Sheet and the Cash Flow Statement. There are four areas of information, which we can collect from a company's financial statements. They are: Ÿ