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Explain why Listed Companies Produce Financial Statements for Externals Users and how These are Regulated in the UK - Coursework Example

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Explain why Listed Companies Produce Financial Statements for Externals Users and how These are Regulated in the UK

According to Tracy, J. (2009), these users are interested in “four basic financial aspects of a business”. These four are the “sales revenue and profit or loss performance”, the “financial condition...in particular the solvency prospects of the company, the capital issued by the company and “any other claims that directly or indirectly participate in the profit of the business” and the sources and uses of the company’s cash flows (Tracy, 2009). Financial statements are especially critical for listed or public companies. These are the companies that are in the centre of the capital market of any country. These capital markets are the source of capital resources, which are needed by any company, in particular, and any economy, in general, to efficiently produce goods and services for the consumption of the public. Thus, the capital market should be effective in order to produce sufficient capital resources. In order to be effective; the participants (i.e., investors) of the capital market must be able to arrive at good investment decisions and must be able to obtain “useful information” from which they can base these good decisions. ...
Recognising this, the various regulatory bodies (both in UK and in Europe) had emphasized the importance of issuing complete, timely and accurate financial statements by its listed companies. Various rules and regulations have been established to regulate the preparation of these listed companies’ financial statements. Some of these regulations provide general rules and guidelines in the preparation of the financial statements while others are more concerned with ensuring compliance to these rules and guidelines. One such regulation deals with the accounting principles to be utilised by the listed company in the preparation of its financial statement. The most recent regulation that was established for the required accounting principles was the 2002 regulation issued by the European Union (EU). The EU was established “to foster economic cooperation” and had “evolved into an organisation spanning all areas, from development aid to environmental policy” (EU). It helped established common rules and policies for its country members. As a member of the EU, the UK needs to comply with these rules and policies. One such policy had a direct impact on the financial statement reporting process of listed companies and this is the Regulation (EC) No 1606/2002. In this regulation, the EU specifically stated that it aims to contribute to the “efficient and cost – effective functioning of the capital market” and to protect the investors and maintain confidence in the financial markets. To retain the competitiveness of EU’s capital market, it recognises the need to converge the accounting standards used in the preparation of ...Show more

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Explain why listed companies produce financial statements for external users and how these are regulated in the UK. Over the years, the preparation and the issuance of financial statements have become important processes for many companies around the world…
Author : charlie27
Explain why Listed Companies Produce Financial Statements for Externals Users and how These are Regulated in the UK essay example
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