PREPARE FINANCIAL REPORTS FOR CORPORATE ENTITIES ASSESSMENT 2 Essay Example
The financial report will be prepared for the shareholders, the company creditors, investors, the board of directors, employees, government for tax purposes and the management. The dissemination of this report will be done through the email, through the post office, through the newsletters and also the publication on the online in the company website (Mardini, et al., 5)..
The recipient for this information is need this information for various reasons depending on its relationship with the company. For instance, management needs this information for making vital decision as to what direction or strategic decision concerning the company growth and development are necessary for the growth of the company. It help in establishing the short term and long term objective for the organization. Creditors on the other hand would like to know the financial stability of the company they are supplying and owe them money. They would like to know the going concern of the company they are dealing with. The investors would like to see the investment viability of the company, on whether it is viable and risk free to invest in the company and whether they can continue providing funds for the company. The government on the other hand would like to know the tax they expect from the company using financial statements.
The financial reports contains four major components. First, it contain comprehensive income statement which is the information on revenue and cost of revenue normally known as cost of goods sold. It provides information on the company overhead expenses and the net profit or loss the company has realized at the end of financial period. The second component of the report is comprehensive financial position statement of the company which contains the net assets of the company, liabilities of the company, the capital of the company and the total equity of the company. The third component is the cash flow statement of the company which contains cash in and cash out. The last component the statement of change on the shareholders equity of the company. The report also have the accounting principles used in the preparation of financial statements.
The trend analysis in the report is a clear indication of internal use of financial data as it helps in comparing the current performance and past performance. The organization has clearly disclosed asset valuation in the footnotes and the method of depreciation are also clearly started in the statement report.
From the audited report presented by the company in their website, there are no discrepancies when it comes to reported figures. The accounting principles, procedures and standards are well spelled out in the report and explanation on how each figure reported in the report was arrived at is well explained (Biddle, 25).
The benefits and allowances are not all claimed by the company. The only notable claims in the statement is the discount allowance and tax allowance reported in the financial statement and well explained.
In the income statement, the company has recorded in details both revenue and expenditure used to achieve those revenue. They are classified as the operational cost and overhead cost. Hence they can be easily understood by the third party users.
The summary of financial report is well reported with a three year profit statement of the company. This is a clear snapshot of overall company operation and in case an interested party wish to not to read the whole report, they can only read the summary and still get the overall view of the company performance. Major recommendation noted in the report include the risk management when it comes to foreign exchange management of the company. This include translation risk and transaction risk since the company is operating internationally and is exposed to fluctuation of foreign exchange.
The report is clear and logical. This is due to the fact that they are prepared in line with accounting standards and regulations. This gives them the logical and necessary regulation which is needed to present financial information for external users (Biddle, 28).
Yes the company has complied with the regulatory requirements as per the ASIC and IFRS which require the company to report financial report. The format and the structure is per the requirements.
The two reports are similar in terms of structure and organization. They are accurate and as per the requirements. The reports give historical report and it confirms the already reported data. The report does not need any further adjustments. The report is audited and this is a sure authenticity of this report. The report will consistency with the upcoming reports.
There are four basic financial statement which are being prepared by any listed organization as per the international financial reporting standards. The first one is the balance sheet. Balance sheet reports on the financial position of the company. It contain elements like liabilities, assets and stockholders equity. It is being prepared at a given point in time and it gives the name of the entity, title of the statement, specific date of preparation and the unit of measure (Mardini, et al., 17).
The second statement is the income statement. It measures the business revenue, expenses and the net income. The income statement help in the establishing the performance of the company in terms of profitability and break-even analysis (Biddle, 23).
The third statement is the statement of retained earnings. The heading identifies the name of the entity being reported and the unit of measure used in the statements. The statement reports the same way that the net income and the distribution of dividends affected the company financial position during the accounting period (Mardini, et al., 17). The net income and the earned during the year increases the balance of retained earnings which shows the relationship of the income statement to the balance sheet. Lastly, the statement of the cash flow which is divided into three primary parts. It contain the cash flow from the operating activities, cash flow from the investing activities and the cash flow from the financing activities.
Biddle, G. C. «The Role of Financial Statements in Reporting Financial Performance.» Accounting & Finance/IASB Research Forum. 2015.
Mardini, Ghassan H., Louise Crawford, and David M. Power. «Perceptions of external auditors, preparers and users of financial statements about the adoption of IFRS 8: Evidence from Jordan.» Journal of Applied Accounting Research 16.1 (2015): 2-27.
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