Financial Reporting

Financial reporting is a communication that enables users of financial statements to evaluate the company's profitability and financial situation (Scott, 2009). This information is provided in the framework of accounting to ensure neutrality, comparability and understandability of all users of the financial statements. The main role is to reduce the asymmetry of information between managers and investors, creditors, governments, employees, consumers, and stakeholders such as the public. These stakeholders are direct or indirect participants in the capital market, and companies compete for capital in the form of capital or credit (Scott, 2009).

The conceptual framework of financial reporting prepared by the executive board shows the basic concept of financial reporting. The conceptual framework consists of two chapters: the purpose and qualitative characteristics of financial reporting, and the constraints of decision making - useful financial reporting information - useful financial reporting information. This conceptual framework establishes the common financial reporting objectives of private entities that form the basis of the framework. The purpose of general financial reporting is to provide financial information on funds currently available for decision making. This information may also be useful for users of non-capital providers.

Essay.com / Financial Reporting Objective and Quality Characteristics and Restrictions

Purpose and quality characteristics and restrictions of financial reporting

General Financial Reporting sets out excellent reporting standards to help achieve efficient economic management and efficient allocation of resources in the capital market. General financial reporting focuses on a wide range of user needs lacking the ability to obtain the necessary financial information from an entity. It must be wide enough to understand the information of various users. Therefore, financial reporting relies on access to information. Different users may require different information that may be beyond the scope of general financial reporting.

Essay.com / Financial Reporting Objective and Quality Characteristics and Restrictions

Purpose and quality characteristics and restrictions of financial reporting

General financial reporting is limited to information that does not reflect information on other sources for users to consider. Financial reporting information is based on estimates, judgments and models of financial impact on trading companies and other events and is ideal only for authors and standard setters. Due to technical inefficiency and cost constraints, it is difficult to achieve the ideal financial reporting vision of the framework in a short period of time.

Essay.com / Financial Reporting Objective and Quality Characteristics and Restrictions

Purpose and quality characteristics and restrictions of financial reporting