The creditors assess the ability of a company to repay their loan. Hence, ratios pertaining to leverage and cash flows are essential for the company’s creditors and bondholders. Existing and potential Shareholders: Existing shareholders need the financial accounts to assess the long term viability of their investment whereas potential shareholders also require financial information to decide the future prospects of the company (Porter & Norton, 2012). This aids in deciding whether the investor should invest in the company or not. Shareholders generally look at the company’s ratios such as return on equity, dividend yield and price to earnings ratio to assess whether to invest or to not invest in company. Governmental Agencies: Tax collection agencies are interested in a company’s financial accounts to ascertain the tax that a corporation must pay to the government. Securities and Exchange Commission (SEC) prescribes the manner in which financial statements are presented and hence effectively is a user of company’s financial accounts (Sofat & Hiro, 2006). Stock brokers and financial analysts: Financial analysts use a company’s financial counts to prepare financial reports advising their clients to invest in a particular stock. Supplier: Suppliers of a company also use financial accounts to assess whether the company would be able to honour its payments. Suppliers look at a company’s accounts payable and if the accounts payable are very high, it indicates that the company’s creditworthiness is low. Suppliers are also concerned with liquidity ratios such as current ratio and acid test ratio to ascertain a company’s ability to meet short term commitments. 2. Financial Accounts are prepared by a company itself and the information presented in the financial accounts is only available with the internal sources of a company. Hence a company can twist the factual information to present a glossy picture of the company in order to entice investors to invest in the company. This is why the role of auditors and regulators is very important in the presentation of financial accounts. Regulations safeguard the interests of external user of financial accounts so that the information presented by the company is free of any bias and errors. The regulations require that the companies present the financial information accurately on an annual basis and the statements should be duly audited by an external auditor. Moreover, the financial accounts should give a true and fair picture of the company and the company should not attempt to misrepresent any information. Moreover, the requirements differ if a company is a sole proprietorship, partnership or a public limited company. A company also needs to adopt accounting standards based on the location it operates in. International Accounting Standards Board (IASB) is an independent standard setting body of IFRS (International Financial Reporting Standards) foundation (IFRS, 2013). A company has to claim compliance with IFRS and present its account on the basis to IFRS. This helps in comparing the financial statements of various companies across an industry and helps in deciding whether the company’s performance has improved or worsened compared t the overall industry’s performance. On the other hand, FASB (Financial Accounting Standards Board) also establish accounting standards in the United States and the companies operating in the US have to
1. Users of accounting information are categorized based on their relationship with the company. Financial accounts are prepared for the external users of a company. External users are not directly linked to the operations of a company and hence have reduced ability to obtain information…
Here it has been highlighted as to whether the company complied with any revisions or changes in accounting standards like AASB 101; and other accounting standards relating to intangible asset; provisions and contingent items etc. Any change adopted by the company in financial reporting for 2009 over the previous year has also been discussed.
Thus financial reporting framework helps to reduce the information asymmetry that exists between the management and the shareholders. It narrows down the financial knowledge to a level that the shareholders can interpret. Financial reporting is an interpretation which generally applies to transactions, management team uses its knowledge to develop and implement an accounting policy which results in information that is relevant and reliable to be used in making financial decisions by management themselves, shareholders and potential investors.
Apart from Balance Sheet, It also includes provisions regarding the way the reporting should be done in the profit and loss account as well as in cash flow statements. The major significance of this standard is in understanding that reporting the substance of the transaction forms the core of financial reporting.
l for cost-based payments. (Encyclopedia Britannica, 2007)
The aim of this paper is to critically compare and contrast the accounting methods, structure and regulation in Canada with the UK including a critical and detail analysis of both current issues and academic literature surveyed relevant to the country.
To support such changes, companies have altered their management accounting practices to adapt to the ever changing environment. There is sufficient research done by the authors discussed in this work, to support such a statement.
(Ensure that you provide reasons to support your answers in each case and state clearly any assumptions you have made in preparing your answers.)
The Management Committee of RVCCC is considered a reporting entity in accordance with the SAC 1 'Definition of the Reporting Entity'.
It is the presentation of financial data relating to the performance, position as well as the flow of assets in a given accounting period which is then conveyed to different users of accounting information in order to facilitate their decision-making process. The sole objective
uch information is subject to different laws and regulations in various countries, which influence the content and the format for preparing the financial statements. In response to the existence of different accounting practices, the International Accounting Standard has
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