Financial Statements

Financial Statements

Part I

In order to ensure that the financial information presented in the financial statements have fulfilled the accounting standards which includes Generally Accepted Accounting Principle (GAAP), International Financial Reporting Standards (IFRS) and etc. Companies operating in United States of America need to follow the US GAAP principles in order to record, represent and report the financial information. This principle is important for the investors, creditors and other stakeholders who make their decisions on the basis of the information provided in the companies statements by using these principles.

According to Jermakozwic and McGuire (2002) International Financial Reporting Standards are important for the US companies that have subsidiaries in different parts of the world. Thus IFRS enable the parent company to provide financial statements of its subsidiaries as well by using similar accounting policies. IFRS also enables the parent company to follow similar accounting policies in the entire organization and prepare financial accounts for the investor's equity accounting. These accounting standards help in improving the performance of the organization.

The Securities and Exchange Commission (SEC) is important for the financial statements because it protects the investors and provides them the surety that financial statements are fair, free from fraudulent activities. The Security and Exchange Commission facilitates a capital market for the investors, where investors either big or small have an access towards a particular amount of information of a company.

Annual reports are a major source of financial information where different financial statements like balance sheet, cash flow, income statement and etc. provides different kind of information about the financial health of a firm. The information published in the annual reports is used by Shareholders and Stakeholders to analyze the financial and overall performance of the firm during an accounting period. Annual reports in which financial statements are included helps the shareholders and ...