FINANCIAL REPORTING

Financial Reporting

Financial Reporting

Introduction

The financial reporting (financial planning, budgeting, accounting) provides transparency regarding planned adopted and expenditure incurred during a period, as well as forecasted and realized earnings. This reporting is important as it shows fair means of company's presentation regarding the high quality of corporate governance and foster investment.

Discussion

Financail Reporting In UK

Financial reporting represents company's financial data regarding operating performance, position in the market, flow of cash during the accounting period. This information is presented in annual report so that external stockholder can view it. Hence, this is a way to summarize the financial transaction in annual report during a given period (catalogue.pearsoned.co.uk).

Annual report consists of different kind of statements which should be a true and fair view that is Fair presentation. For this purpose there are certain standard and companies law developed so that companies can follow and enhance their reputation in the market. Companies' laws codified some existing standards in common (case) law, in particular the rules relating to duties of company their directors, and implement the rules of the Directives of the European Union, "On the transparency, (Transparency Directive 2004/1 09/EC) and “On Takeover, (Takeover Directive 2004/25 / EU). Among the innovations of the Act include the following: procedure is greatly simplified business registration; principal founding document is the Constitution (Articles of association); Memorandum of Association (Memorandum of association) has an auxiliary character; - standing of the company is no longer limited to the purposes specified in the Memorandum; requirement for a statement of equity set aside; introduced a new procedure to reduce the share capital; established new requirements for directors; the law provides for general duties of directors based on the principles of common law; — a private company is no longer required to have a secretary; shortened deadlines for financial reporting for private and public companies; abolished the requirement for an annual general meeting (Annual General Meeting) for a private company; provides a number of other previously unknown English law provisions.

Looking at the above Companies act, it was necessary that certain standards much be developed so that companies can show fair and true value of the financial position. U.K. and U.S. have different standard and other countries follows those standards depending upon their requirement. IFRS are a set of accounting standards related interpretations, and conceptual framework issued by the International Accounting Standards, the IASB. It ensure direct comparability of financial statements of companies operating in different countries, as required by individual countries accounting principles, and ultimately made on the basis of financial statements of companies, significantly different from each other (www.frc.org.uk).

Whereas, U.S. GAAP include all standards and U.S. accounting principles promulgated by the FASB (Financial Accounting Standards Board). They are applicable to listed companies in the United States. Preparation of financial statements under U.S. GAAP allows the company to enter the New York Stock Exchange and other U.S. access to capital markets, more and more European companies prepare their financial statements under U.S. GAAP, IASB conceptual assumptions were modeled on previous ...