Financial Reporting Explained
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Financial reporting is a broad concept which includes preparation of financial statements, notes to financial statements and disclosures, additional information and other forms of financial reporting .The primary focus of financial reporting is to provide information on earnings. Earnings information gives the shareholders, investors and government authorities a picture of the business’s current and future ability to make positive cash flows.
Financial reporting is done to provide management information to take financial and investment decisions, to create slack resources and for optimum utilisation of resources. Financial reporting is required to provide information on viability of the business to its investors. Financial reporting also reports on the performance of the business and changes in financial position of the business and is useful to a large range of users in making economic decisions.
Financial Reporting assignments need a sound understanding of the subject and our expert authors have tried simplifying them for you
The reporting comprises of preparation of financial statements which are records of financial activities of the business giving a picture of the short term and long term financial position of the organisation. The financial statements comprise of Statement of financial position (Balance Sheet), Statement of comprehensive income (profit and loss account), statement of changes in equity and statement of cash flows.
Financial statements also must be prepared in accordance with Generally Accepted Accounting Practice in the UK, or UK GAAP. The financial statements should be understandable, comparable, reliable and relevant and the figures of assets, liability, income and expenses reported are directly related to an organisation’s financial position.
UK GAAP, is the body of regulation which puts forth how company accounts must be prepared in the UK. This includes not only accounting standards, but also UK company law. The Financial Reporting Council (FRC) promotes high quality corporate governance and reporting in UK by issuing accounting standards and which is recognised for that purpose under the Companies Act 1985.
Accounting standards developed by the FRC or, previously, by the Accounting Standards Board (ASB) are contained in ‘Financial Reporting Standards’ (FRSs). The ASB adopted the standards issued by the ASC called ‘Statements of Standard Accounting Practice’ (SSAPs). A base for preparing financial reports in UK is FRS 3- Reporting Financial Performance.
Reporting Statements are prepared as per accounting standards issued under UK GAAP to develop the best practices of financial reporting of annual accounts. The financial reporting aims at presenting the financial performance of public sector bodies. Financial reporting is intended to support the UK Government’s functions of planning, monitoring and management of public expenditure.
Students may chose from the following financial reporting topics like accounting for financial instruments, accounting for various types of business combinations (i.e. associates, joint ventures, and acquisitions), theories of accounting regulations, practical financial analysis techniques to analyse and apply financial statements for the purpose of valuation of shares and financial predictions to write assignments.
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