Unit 11 Financial Accounting And Reporting Assignment
Differences between the UK accounting standards and IFRS:
Since, we have already discussed about the applicability of the financial accounting standards and the IFRS in applicable scenarios, it still is a matter of discussion to understand the fundamental differences between UK accounting standards and the IFRS,
- Both of the standards did not always deal with the same problem though they may appear same in outlook but at times there details and purpose is not identical.
- In case UK ASB and IASB issue a standard in similar reference it is observed that the guidelines of IASB are more generalized and not problem specific.
The role of accounting and reporting standards in dealing with laws and regulations: In our analysis so far, we have been able to understand the implications of regulatory and legal influences upon financial statements. Now it is worth mentioning that, the influences in it have helped in creation of standards that satisfy the legal and regulatory requirements. For an instance, as stated above in the case of companies, the Companies act 2006 requires preparation of accounts in accordance to section 15. Citing the same the regulatory bodies designed Conceptual framework standards which guide principles of preparation of accounts.
It needs to be understood that all the accounting standard framing bodies discussed above are into existence only because they need to ensure that organisations are reporting in a form which helps in dealing with laws and regulations. They achieve this by framing appropriate standards.
Conclusion: After having an in depth analysis of regulatory and legal influences upon financial reporting. It may be said that the regulations set out in this regard are a better source of ensuring transparency and stakeholder accountability. Legal provision like that set out in FRS 1 which requires organisation to prepare a cash flow statement is a perfect example to explain how these regulations impact financial reporting, obviously for the good reasons.
1.2. Users of financial statements and there needs
As already discusses about the inter dependency of different bodies in order to satisfy their ‘needs’ it remains to be stated that there does exists ‘need’ for all the parties involved in a business transaction howsoever their nature and way differs in a large extent. The same logic applies to the financial statements as well wherein the financial statements which are prepared by an organisation under strict guidelines for ensuring better transparency and intimation of relevant and meaningful information to the stakeholders of the organisation. Howsoever the type of information needed by the various stakeholders differs to a great extent and the same is being analysed underneath,
- Customers: Customers are the ones which are the most crucial point in a business cycle. Customer are usually interested in information that is capable of influencing there buying decisions or their outlook regarding the market like, their belief in the brand and there association towards the same. This usually involves assessment of organisations ability to exist in the business and meeting its needs. (Adams 1977)
- Competitors: Competitors are the lot which are majorly concerned about the issues influencing there market existence, so as to reinforce their strategies in order to compete with us. This usually involves the comparison of their performance with the benchmark performance of the best player in the industry. Assessment of financial strength of our organisation is also one way out for them to understand our strategies regarding the conduct of business operations.
- Employees: Employees are a part of internal bodies of the organisation and they are majorly concerned with matters related to their job security or payments. They seek information for analysing issues like whether to continue working for us and, if so, whether to demand higher rewards for doing the same (Atrill 2011). The basis of their decision making is evidently from the organisations future plans, profit status and the overall financial stability which are derived from organisations financial statements.
- Government: Government seeks information’s for a much wider purpose. It looks to adjudge the overall market situation, ensuring welfare of one and of all. Government looks for looking information that helps them in assessing factors like whether we should pay tax and, if so, how much, whether it complies with agreed pricing policies, whether financial support is needed. For deriving this information government looks at the organisations profit status, sales revenues and the overall financial strength.
- Community: Community or the society is another indispensable lot that should be taken due care of to ensure sustainable market existence. Community at large seeks for information like the capability of the organisation to continue to provide employment opportunities for the community, the extent to which it is likely to use the resources of the community and its likely willingness to help fund for CSR initiatives (Drysdale 2010).
- Suppliers: Suppliers seek information that helps them to form decisions regarding, whether to continue to maintain the supply of raw materials/utilities to the organisation, Should there be any change in the existing or demanded credit line. Usually suppliers derive these information’s from the financial strength and the short term liquidity position of the organisation.
- Lenders: Lenders look for information that helps them in deriving a decision as to whether to lend money to the organisation, or not. This decision is usually made by checking the organisations capability to pay the debts as and when they would have arisen in short and long term.
- Managers: Managers lookout for information that helps them analyse, the status of the business operations and whether is required any improvement in the same. This is usually made by analysing current financial performance and status with the past performances of the organisation. Managers also look out for developing a basis for decision making in order to design the strategies of the organisation.
- Owners: Owners are the decision making nodes in the organisational hierarchy hence, all information whether financially influencing or non-influencing have an impact on the modus operandi of the organisation. Howsoever owners make decisions like whether to invest more or dispose of the investment currently held. This usually involves assessment of risk and return factors with the stake ownership of the organisation.