Four Sources of External Financial Reporting - Assignment Example

Introduction Businesses in this competitive world are looking towards finding every opportunity which will ensure better productivity. Financial reporting is a step in that direction as it helps the business to evaluate the manner in which the various departments have worked and helps to increase the relevance of the audit function as the role of the auditor multiples. Since, financial reporting follows a series of systematic steps and prescribes the different areas which the auditor needs to lay stress has increased the relevance of the audit function. Organizations need to ensure that they have an financial reporting standard because it helps to fill up the various loopholes that might remain in the system. Being able to develop helps to provide internal control which acts as a tool to measure the performance and at the same time reduce the chances of frauds and misappropriation of funds. Four Sources of External Financial Reporting The Australian reporting standards have been developed in such a manner that it ensures maximum transparency and allows the user of the financial statement to gather maximum information which will ensure proper decision making and help the business to gain efficiency in the manner decisions are taken. This has resulted in different financial reporting standards which have been developed. Each financial reporting standard looks towards ensuring better representation of data so that the information available can be used to gain a complete picture of the business performances. This has identified the following four type of sources of external financial reporting regulations in Australia. FRS 1: which prescribes the manner in which organizations are to prepare cash flow statements so that there is easy comparability between the financial statement of different companies. Since, cash flow statement determines the amount of cash that the business receives and spends and thereby helps to understand the manner in which the cash flow pattern in the business is developed. Having this function ensure better comparability. Having single reporting is ensuring that “information is compiled in a better way and it helps to find out how the financial performance gets altered due to it” (Robert & Michael, 2010). The Australian financial reports to improve transparency for the society and to ensure that all the requirements are met have prescribed certain norms. This ensures that the society is able to get the information they are looking for and based on it develop a mechanism which will ensure better representation of information. FRS3: has been developed to ensure consistency and developing a pattern in which the performances of different organizations cab be compared. Using this accounting standard will ensure that the business is able to ensure consistency and ensures better understanding of the performance of different companies as easy comparability is possible. This also helps to enhance transparency and ensures that the business is able to provide maximum information which can be used in the future for decision making. The submission of financial report in the form they are submitted ensures that “the three tier reporting framework required for companies limited by guarantee is streamlined as per the guidelines”. (Collins, 2010) This helps to ensure easy comparison and makes it easy for the investors to understand the companies which they can look towards investing in. FRS 10: reporting standard has been developed by giving special emphasis on goodwill and intangibles. This holds an important aspect for all business and being able to identify clearly the manner in which goodwill and intangibles are charged to profit and loss account. This will help the user of the financial statement to understand the manner in which goodwill has to be reported and will help to increase the understanding on the manner in which goodwill is treated. This will thereby improve efficiency and ensure that people associated with the company knows what is happening. This will further help to consolidate the manner in which the different strategy of the business is developed and will help to improve the understanding in which reporting is done FRS 15: helps to understand the manner in which reporting of tangible fixed assets will be done. It tries to explain how the non current assets value will be found, situations when the assets need to be treated as long term, the treatment relating to deficiencies and surplus and impairment. This thus helps to ascertain the correct value of the assets that will help the user of the financial statement gauge the correct value of the enterprises. Business units need to see that the values are ascertained properly so that the users of the financial information are able to draw a correct picture. Business units need to adhere to these international standards so that they are able to raise money from the public and also help them meet the standards set internationally. This will thereby help to improve the effectiveness of financial reporting standards and will help the business to ensure transparency and better reporting standards Importance of Financial Reporting The different financial reporting standards are working in tandem to develop and bring changes in the accounting principles and policies so that the presentation of financial statements becomes more consistent and recognized internationally. It is important that the financial reporting standard look towards using all the four reporting standards as they work in different directions and involving all the four sources will help to ensure that the reporting is better and consistent. Using all the four accounting standards will help the investors and lenders as they know the actual position of the company. Since, it’s the financial statement which speaks about a company’s financial health so representing the true picture will help investors to decide their future course of action. As financial statements reflect the future of the company and past transactions are of less relevance it is important that they present the true picture and using the four standards will provide the consistency which will help in proper presentation of the financial information. Using the four sources of external financial reporting will help to ensure the development of “hierarchy”. This increases consistency and comparability in fair value and better disclosure of information. Thus, business units which a mix of different financial reporting standards ensures that the assets are properly valued and the true and fair picture is reflected. This will help business units to see that assets are replaced at the right time and this will not hamper the progress of the business units thereby enabling them to grow and multiply themselves Reporting Entity for Barmunda Pty Ltd Barmunda Pty Ltd should look towards following the reporting entity standard provided by SAC 1 as it will help to ensure that the business is able to gain advantage from the process of reporting and will be able to ensure maximum transparency. This will also help Barmunda Pty Ltd to ensure that all information is provided correctly to the user of the statement and will benefit the business to take decisions towards the growth of the business SAC 1 has established a benchmark which governs the situation under which the business needs to look towards reporting standards so that the business is able to gain maximum efficiency. Since, SAC 1 states the situation under which the business should look towards reporting so that the business is able to grow and ensure maximum returns it makes it important that Barmunda Pty Ltd looks towards reporting as it matches the different standards provided by them. Barmunda Pty Ltd needs to ensure that they have an financial reporting system because it helps to fill up the various loopholes that might remain in the system. Being able to develop it helps to provide internal control which acts as a tool to measure the performance and at the same time reduce the chances of frauds and misappropriation of funds. This will thereby help Barmunda Pty Ltd to develop a strategy where they are able to gain. Since, the business has been in operation for more than 15 years and has a lot of assets on which large amount of depreciation has already being charged so being able to ensure that the financial reporting is done will ensures transparency and help Barmunda Pty Ltd to get the asset easily when it is fully depreciated. Having a professional body reporting standards would ensure that Barmunda Pty Ltd works on different fundamentals and every issue are brought forward to the management so that better decisions can be taken. Barmunda Pty Ltd through this mechanism will also be able to ensure that they comply with the laws and regulations that have been prescribed by the law and will ensure that the final documentation and presentation matches the one provided by law This will thereby benefit Barmunda Pty Ltd and ensure that they are able to follow the different principle of accounting reporting consistently and will thereby guide the company in ensuring better consistency in their information. This will help Barmunda Pty Ltd to evaluate the financial reporting ensures that the department is able to promote orderly, economical and efficient process which will help to gain productivity in operations. Barmunda Pty Ltd thus will be able to ensure a check which helps to evaluate the performance against set standards and take steps which will help to improve the overall efficiency so that the financial reporting provides beneficial results. Barmunda Pty Ltd through this will be able to ensure that they adhere according to the law and rules prescribed by the directives. This will help to check the method which will ensure that the organization is able to abide to the regulatory framework. This will thereby act as a tool to ensure that the work is done according to the prescribed rules and any deviations can be brought to the notice so that steps can be taken at the right time Thus, by evaluating the performance through financial reporting Barmunda Pty Ltd will be able to verify the performance and help the organization in developing a mechanism which will help them in achieving better results towards the growth of the organization. The risk identified for organizations makes it important that the organization is able to use different procedures so that the risk can be managed properly. Financial reporting thereby has a role to play in the performance of the organization as having the requisite knowledge which will help business to take decisions which are correct. Since, reporting look to follow a systematic process so having those function will increase the efficiency and ensure that the business is able to get better results Implication Barmunda Pty Ltd through the process of financial reporting will be able to ensure to improve transparency for the society and to ensure that all the requirements are met have prescribed certain norms. This will ensure that the financial statements reflect the correct value and the chances of loss of consumer confidence and failure reduces. This would have helped the investor to understand the actual position in hand and would have reduced the impact of failures on other organizations. This would be an area where financial reporting could have contributed immensely and could have shaped the manner in which organizations perform Conclusion Thus, the financial reports submitted in Australia helps to achieve the objective it is meant for. With the recent changes in policies and concern for the environment and society certain changes needs to be accounted for o that the presentation of reports becomes better and more information regarding to transparency is provided. These small changes will help to improve the efficiency and make the presentation of reports better. Business units need to see that the values are ascertained properly so that the users of the financial information are able to draw a correct picture. Business units need to adhere to these international standards so that they are able to raise money from the public and also help them meet the standards set internationally. Thus, business units which use financial reporting standards and ensure that the assets are properly valued and the true and fair picture is reflected. This will help business units to see that assets are replaced at the right time and this will not hamper the progress of the business units thereby enabling them to grow and multiply themselves. Read More