Você está na página 1de 19

A seminar on modern Accounting

Theme : Corporate reporting , objectives


and international development on Financial
reporting .

Presented by : Abdirashid A.

Presented to: Dr.Harpreet Kuar


Content outline
Introduction
Concept of Corporate reporting
Objectives of financial reporting
General objectives of Financial Statement
Qualitative and Quantitative characteristics
Recent Statutory development
Conclusion
Introduction

Accounting being regarded as the language of


business is as old as the business itself (Gupta
and Mehra, 2002).
It is a social phenomenon, the primary object
of which is to let the management know the
economic activity of the corporate enterprises
(Mehrotra and Kulshrestha, 1990).
Cont

Accounting has two fold phases, first


measuring and arraying the economic data
and second communicating the results of this
process to the interested parties (Gupta, 1977).
Concept of Corporate Financial Reporting

The concept of corporate financial reporting has gained much


significance due to the expansion and growth of company
form of organization, increased competition and increase in
the information needs of the users (Singh, 2005)
Cont
The corporate financial reporting is a system
of communication between the management
and the user-groups of the financial
statements; in order to report the results of the
business activities of a corporate enterprise
and also to demonstrate the credibility,
accountability and reliability of its working
(Saeed,1990)
Cont..
The subject of financial reporting has gained significance
during the recent years because of various compelling factors,
such as :
The expansion and growth of the company form of
organization; shift in the emphasis from the concept of
shareholders to stakeholders and increase in their
informational needs; the enactments and amendments in
disclosure laws in various countries; professionalism of
management; emergence of accounting as a recognized
profession; and the pronouncements on disclosure made by
various professional accounting bodies in India and abroad
(Chander,1992)
Objectives of Financial Reporting

Corporate financial reporting is not an end in itself but is a means to


certain objectives (Devarajan, 2008).
The fundamental objective of corporate financial reporting is to
communicate economic measurements of information about the resources
and performance of the reporting entity useful to those having reasonable
rights to such information and interest in the entity (Oza, 1990).
Cont
The annual financial statements of a company not
only aid its management to regulate the prices of its
goods and services but also help its external users in
different ways such as existing and potential investors
in evaluating their past decisions and making changes
in their investment policies, creditors in assessing
companys worthiness, profitability and liquidity, and
government in administering the system of taxing the
companies (Bhattar, 1995)
Cont..
Hence the fundamental objective of accounting can be categorized under two broad lines namely,

I) Investment decision Making


The basic objective of financial reporting is to provide information useful to investors, creditors and
other users in making sound investment decisions. The True blood Committee stated that. the basic
objective of financial statements is to provide information useful for making economic decisions.
Recently, the FASB (USA) in its Concept No. 1 also concluded that financial reporting should provide
information that is useful to present and potential investors and creditors and other users in making
rational investment, credit and similar decisions.

II) Management Accountability


A second basic objective of financial reporting is to provide information on management
accountability to judge managements effectiveness is utilizing the resources and running the enterprise.
Management of an enterprise is periodically accountable to the owners not only for the custody and safe-
keeping of enterprise resources, but also for their efficient and profitable use and for protecting them to
the extent possible forum favorable economic impacts of factors in the economy such as technological
changes, inflation or deflation. Management accountability covers modern performance issue based on
efficiency and effectiveness notions.
The general objectives of financial
statements are:
1. To provide reliable information about
economic resources and obligations of a
business enterprise in order to
Evaluate its strengths and weaknesses,
Show its financing and investments,
Evaluate its ability to meet its commitment
and
Show its resource base for growth.
Cont.
2) To provide reliable information about changes in net
resources resulting from a business enterprises profit-
directed activities in order to :
show the investors the expected dividend return;
show the organizations ability to pay its creditors and
suppliers, provide jobs for employees, pay taxes, and
generate funds for expansion;
Provide the management with information for planning
and control
show the long-term profitability of the enterprise.
The qualitative characteristics of financial reporting

Relevance- which means selecting the


information most likely to aid the users in their
economic decisions.
Understandability- which implies not only that
the selected information must be intelligible but
also that the users can understand it.
Verifiability-which implies that the accounting
results may be corroborated by independent
measurers using the same measurement
methods.
Timeliness -
Comparability -
RECENT STATUTORY
DEVELOPMENTS
Cash Flow Statement:
A cash flow statement serves the purpose of
providing the information of liquidity, viability
and financial adaptability of the entity
concerned. This statement explains the reason
for the changes in cash and cash equivalents
detailing out cash flows under major heads.
Cont..
Basically, this statement comprises of two parts.
One the traditional cash flow statement and the
second being a reconciliation statement
between net operating cash flows and net profit
disclosed in the Profit and Loss Account.
As per amended clause 32 of the listing
Agreement listed companies/ whose annual
accounts would be approved by shareholders
after 31.3.1995 are required to give a cash flow
statement in their Annual Report.
Balance sheet abstract and
General Business Profile
Part IV has been added to schedule VI to
the Companies Act vide notification dated
May 15, 1995. This is an attempt to
disclose the summarized financial
position, and performance of the
company besides the products of the
company.
Recent ICAI pronouncements
Certain ICAI pronouncements of
Accounting Standards and guidance note
also have an impact on the presentation of
accounting information.
CONCLUSION

Thus the corporate scenario at present is


moving towards the concept of shareholders
education, transparency of Balance Sheets and
fulfillment of social obligations.
Current trends along with the appropriate
guidance from regulatory authorities can result
in substantial developments in the presentation
of structured on line information to investors.
END

THANK YOU FOR YOUR


ATTENTION