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Comparative Financial Reporting - Essay Example
Author : marcelonader
Pages 12 (3012 words)
All companies in the world have a legal requirement to prepare accounts that are in compliance with the law. (McMeeking, 2006). These accounts must be audited by registered auditors to ensure their compliance with applicable laws and accounting standards, as well as ensure that the accounts present fairly the financial performance and position of the companies…
Material misstatements are misstatements that can affect users' decisions on the financial statements of a company. The auditor may either issue an unmodified opinion (when the financial statements are not materially misstated or a modified opinion (when the financial statements are materially misstated). (McMeeking, 2006). This paper examines contemporary issues between International Financial Reporting IFRS and the Generally Accepted Accounting Principles GAAP.
The IASB / FASB project on revising the conceptual Framework has removed ' substance over form'. (IASB / FASB May 2008, Exposure Draft, Conceptual framework for Financial Reporting ) . The explanation is: BC2.19. The Boards concluded that faithful representation means that financial reporting information represent the substance of an economic phenomenon rather than solely its legal form. To represent legal form that differs from the economic substance of the underlying economic phenomenon could not result in a faithful representation. Accordingly, the proposed framework does not identify substance over form as a component of faithful representation because to do so would be redundant.
However, the fair value view assumes that market are relatively perfect and complete and that in such a setting financial reports should satisfy both the interest of passive investors and creditors by stating a curre ...