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This seminar covered topics on corporate reporting objectives and international developments in financial reporting. It discussed the concept of corporate reporting, objectives of financial reporting which include providing reliable information for investment decisions and assessing management accountability. Recent statutory developments like the cash flow statement were also covered. The presentation concluded that current trends along with regulatory guidance can improve online financial information for investors.
This seminar covered topics on corporate reporting objectives and international developments in financial reporting. It discussed the concept of corporate reporting, objectives of financial reporting which include providing reliable information for investment decisions and assessing management accountability. Recent statutory developments like the cash flow statement were also covered. The presentation concluded that current trends along with regulatory guidance can improve online financial information for investors.
This seminar covered topics on corporate reporting objectives and international developments in financial reporting. It discussed the concept of corporate reporting, objectives of financial reporting which include providing reliable information for investment decisions and assessing management accountability. Recent statutory developments like the cash flow statement were also covered. The presentation concluded that current trends along with regulatory guidance can improve online financial information for investors.
and international development on Financial reporting .
Presented by : Abdirashid A.
Presented to: Dr.Harpreet Kuar
Content outline Introduction Concept of Corporate reporting Objectives of financial reporting General objectives of Financial Statement Qualitative and Quantitative characteristics Recent Statutory development Conclusion Introduction
Accounting being regarded as the language of
business is as old as the business itself (Gupta and Mehra, 2002). It is a social phenomenon, the primary object of which is to let the management know the economic activity of the corporate enterprises (Mehrotra and Kulshrestha, 1990). Cont
Accounting has two fold phases, first
measuring and arraying the economic data and second communicating the results of this process to the interested parties (Gupta, 1977). Concept of Corporate Financial Reporting
The concept of corporate financial reporting has gained much
significance due to the expansion and growth of company form of organization, increased competition and increase in the information needs of the users (Singh, 2005) Cont The corporate financial reporting is a system of communication between the management and the user-groups of the financial statements; in order to report the results of the business activities of a corporate enterprise and also to demonstrate the credibility, accountability and reliability of its working (Saeed,1990) Cont.. The subject of financial reporting has gained significance during the recent years because of various compelling factors, such as : The expansion and growth of the company form of organization; shift in the emphasis from the concept of shareholders to stakeholders and increase in their informational needs; the enactments and amendments in disclosure laws in various countries; professionalism of management; emergence of accounting as a recognized profession; and the pronouncements on disclosure made by various professional accounting bodies in India and abroad (Chander,1992) Objectives of Financial Reporting
Corporate financial reporting is not an end in itself but is a means to
certain objectives (Devarajan, 2008). The fundamental objective of corporate financial reporting is to communicate economic measurements of information about the resources and performance of the reporting entity useful to those having reasonable rights to such information and interest in the entity (Oza, 1990). Cont The annual financial statements of a company not only aid its management to regulate the prices of its goods and services but also help its external users in different ways such as existing and potential investors in evaluating their past decisions and making changes in their investment policies, creditors in assessing companys worthiness, profitability and liquidity, and government in administering the system of taxing the companies (Bhattar, 1995) Cont.. Hence the fundamental objective of accounting can be categorized under two broad lines namely,
I) Investment decision Making
The basic objective of financial reporting is to provide information useful to investors, creditors and other users in making sound investment decisions. The True blood Committee stated that. the basic objective of financial statements is to provide information useful for making economic decisions. Recently, the FASB (USA) in its Concept No. 1 also concluded that financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit and similar decisions.
II) Management Accountability
A second basic objective of financial reporting is to provide information on management accountability to judge managements effectiveness is utilizing the resources and running the enterprise. Management of an enterprise is periodically accountable to the owners not only for the custody and safe- keeping of enterprise resources, but also for their efficient and profitable use and for protecting them to the extent possible forum favorable economic impacts of factors in the economy such as technological changes, inflation or deflation. Management accountability covers modern performance issue based on efficiency and effectiveness notions. The general objectives of financial statements are: 1. To provide reliable information about economic resources and obligations of a business enterprise in order to Evaluate its strengths and weaknesses, Show its financing and investments, Evaluate its ability to meet its commitment and Show its resource base for growth. Cont. 2) To provide reliable information about changes in net resources resulting from a business enterprises profit- directed activities in order to : show the investors the expected dividend return; show the organizations ability to pay its creditors and suppliers, provide jobs for employees, pay taxes, and generate funds for expansion; Provide the management with information for planning and control show the long-term profitability of the enterprise. The qualitative characteristics of financial reporting
Relevance- which means selecting the
information most likely to aid the users in their economic decisions. Understandability- which implies not only that the selected information must be intelligible but also that the users can understand it. Verifiability-which implies that the accounting results may be corroborated by independent measurers using the same measurement methods. Timeliness - Comparability - RECENT STATUTORY DEVELOPMENTS Cash Flow Statement: A cash flow statement serves the purpose of providing the information of liquidity, viability and financial adaptability of the entity concerned. This statement explains the reason for the changes in cash and cash equivalents detailing out cash flows under major heads. Cont.. Basically, this statement comprises of two parts. One the traditional cash flow statement and the second being a reconciliation statement between net operating cash flows and net profit disclosed in the Profit and Loss Account. As per amended clause 32 of the listing Agreement listed companies/ whose annual accounts would be approved by shareholders after 31.3.1995 are required to give a cash flow statement in their Annual Report. Balance sheet abstract and General Business Profile Part IV has been added to schedule VI to the Companies Act vide notification dated May 15, 1995. This is an attempt to disclose the summarized financial position, and performance of the company besides the products of the company. Recent ICAI pronouncements Certain ICAI pronouncements of Accounting Standards and guidance note also have an impact on the presentation of accounting information. CONCLUSION
Thus the corporate scenario at present is
moving towards the concept of shareholders education, transparency of Balance Sheets and fulfillment of social obligations. Current trends along with the appropriate guidance from regulatory authorities can result in substantial developments in the presentation of structured on line information to investors. END
"The Language of Business: How Accounting Tells Your Story" "A Comprehensive Guide to Understanding, Interpreting, and Leveraging Financial Statements for Personal and Professional Success"