Financial Reporting

Financial Reporting

Introduction

This paper intends to explore the basic elements of financial reporting. This paper is divided in three sections. In the first section, the main focus of this paper is to examine the principles, theory and concepts of accounting in depth. For this purpose, role of international accounting standards board is analyzed and how it serves to justify its objectives. In addition to this, the key elements and purpose of IASB framework in terms of preparing and presenting financial statements is also discussed.

In the second section, it analytically explores the preparation and calculations of cash flow statement. Further, functions and main objectives of cash flow statement are also discussed. In addition to this, with the help of balance sheet and income statement, financial ratios are calculated.

Finally in the third and last section of the paper, it analytically explores the preparation and calculations of income statement and balance sheet of the given company Mine Plc.

Discussion

Q.1

In the first question it is assumed that I am asked to give a presentation to small of people who have formed an investment society and they are interested in investing in a portfolio of shares. However, I shall explain them all about the IASB, their background, importance and framework.

Role of IASB

The IASB (International Accounting Standards Board) is a committee of 14 members based in London and is mainly engaged in the drafting of IFRS and the convergence of the various national accounting standards used throughout the world. The qualitative characteristics within the framework of IASB comprises of two elements;

• Relevance: Financial information is relevant if it is able to make a difference in users' decisions, that is to say if it has predictive value, confirmation or both;

• Faithful Representation: The faithful representation of economic phenomena implies that the relevant phenomena are presented so faithful, that is to say in a comprehensive, neutral and without error.

To be useful, information must be both relevant and faithfully represented. The cost constraint is needed to normalize: it must consider whether the benefits of particular information justify the costs of its production and use. It will be necessarily subjectivity in the appreciation of both qualitative and quantitative (Sandretto, M. 2011).

Relevance

The qualitative features of support improve the usefulness of relevant information and accurately represented and are four in number: comparability, verifiability, speed and intelligibility (Sandretto, M. 2011).

Information shall be relevant in order to be useful in decision-making by users. Financial information is relevant if it is able to make a difference in users' decisions that is to say if it has predictive value, confirmation or both.

The accountant must pay close attention; including the quality characteristics of content. In the old financial accounting conceptual framework, there were two main characteristics of useful information for relevance and reliability and between these two features it may cancel each other out, because the most relevant information may be subject to measurement error, the most reliable information may be not the ...