Financial Reporting Research Essay Example | Topics and Well Written Essays - 1500 words

Financial Reporting Research - Essay Example When making this decision, IAS 8.11 requires the management to show the definitions, recognition procedures, and dimension concepts for assets, incomes, liabilities, expenses and liabilities in the accounting Framework. A good financial statement is one that is understandable to every stakeholder of the company with minimum difficulties, thus financial statements should be simple and easy to understand. Two it should be reliable in that potential investors can rely on it to make decisions. Three it should be easy to compare with other financial statements in the market. Last but not least financial statement should be relevant. The information used in the financial statement should be relevant and material for decision making. Therefore, ambiguous information should be avoided when preparing financial information. This will eliminate any essence of misguide to the stakeholders of the company. Financial reporting standards have been revised severally over years to capture the dynamics in accounting sector. They have reviewed severally to incorporate the emerging trends in global business such as mergers, foreign acquisition among others. Before 2001 the world used to prepare financial statements using international accounting standards (IAS) and any revision on international accounting standards after 2001 is referred to as international financial reporting standard. ( IFRS). According international accounting standard 10 financial statement includes a statement of financial position which shows the total assets of the company, long-term and short term liabilities and the companies equity. Second is the statement of comprehensive income which shows the total revenue and expenditures of the company. Third is the statement of changes in equity, statement of cash flow which shows the ability of the company to pay short term debts and notes to the financial position this provides explanations to the financial statement items. International Accounting Standards Board is charged with mandate of reviewing and revising accounting standards. It comprises of fifteen members drawn across the world. It was formed in 2001 as successor of International Accounting standard committee. It has the responsibility of developing international financial reporting standard and revision of international accounting standard to IFRS. (Wood & Sangster, 2005) According to international financial standards a statement of financial position should have a section of noncurrent assets at cost, their accumulated depreciation and the net book value all shown separately. A section of current asset and current liabilities on separate column and then the working capital of the company are calculated as the difference of current assets and current liabilities. Current assets are those assets that can be converted into cash easily while noncurrent assets are those that are expected to remain in the business for a long period. In this statement there is a section of financing ac tivities which show how the company is financed. The total of noncurrent assets and working capital should always equal to finances of the company. This statement shows the total assets of the company, liabilities of the company both short term and long term