INTERNATIONAL FINANCIAL REPORTING

International Financial Reporting



International Financial Reporting

Financial information disclosed in the general purpose external financial reports provide useful information for users, both internal and external, in the preparation and evaluation of decisions on the allocation of scarce resources. Therefore, it requires that the information, certain attributes that insure the objectives can be achieved GPFR included. This paper examines these attributes, the qualitative characteristics of financial information in four aspects, relevance, reliability and comparability, understandability called.

The objective of financial statements

The objective of financial statements is to provide information on the financial position, performance and changes in financial position of an entity that is useful to a wide range of users in making economic decisions.

Financial statements prepared for this purpose meet the common needs of most users. However, the financial statements do not provide all the information that users may need to make economic decisions since they largely portray the financial effects of past events and do not necessarily provide non-financial information (Viswanath, 2007).

The financial statements also show the results of the stewardship of management or responsibility of managing resources entrusted to it. Users who wish to evaluate the management or control of the management to do so they can make economic decisions, these decisions may include, for example, whether to keep or sell their stake in the entity or the renewal or replacement of leaders.

Financial position, performance and financial developments

Economic decisions are taken by users of financial statements require an evaluation of the ability of an entity to generate cash equivalents and the timing and certainty of their generation. This ability ultimately determines, for example, the ability of an entity to pay its employees and suppliers, to meet interest payments, repay loans and make distributions to its owners. Users are better able to assess this ability to generate cash and cash equivalents if provided with information that focuses on the financial position, performance and changes in financial position of an entity (Dayananda et al., 2002).

The financial situation of an entity is affected by the economic resources it controls, its financial structure, its liquidity and solvency and ability to adapt to the changing environment in which it operates. Information on the economic resources controlled by the entity and its ability in the past to modify these resources is useful in predicting the entity's ability to generate cash and cash equivalents in the future. Information on the financial structure is useful in predicting future borrowing needs and how future earnings and cash flow will be distributed among those with an interest in the entity; it is also useful in predicting the success of the entity is likely to be to raise additional funds. Information on the liquidity and solvency is useful in predicting the entity's ability to meet its financial commitments as they fall due. Liquidity refers to the availability of liquidity in the near future, given the financial commitments during this period. Solvency refers to the availability of liquidity in the long term to meet financial commitments as they fall due ...