Essay Finincial Accounting

2512 Words Jul 7th, 2016 11 Pages
Learning outcome (1): Understand the regulatory framework for financial reporting
User needs: Accounting standards Board (ASBs) Statement of Principles INTRODUCTION
This section of the unit discusses the qualitative characteristics of the financial statements and how it relates to the content and presentation of a financial statement. The second part of this paper sets out to assess the difficulty preparing a useful set of financial statements that exhibits the qualitative characteristics mentioned in the first part.
Defining a financial report:
A financial report is a written report which quantitatively describes the financial health of a company. Financial statements are usually compiled on a quarterly and annually basis .
According to
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Qualitative characteristics are attributes which makes the financial statement useful to the users.
There are four principle qualitative characteristics namely, understandability, relevance, reliability and comparability.
Each of these qualitative characteristics has other characteristics that are attached to them in order to enhance the primary characteristics.
Understandability
Uses need to understand the information provided in the financial statement for it to be useful.
The understandability depends on: (Accounting Standards Board, 1999): i. The way a transaction and other events are characterized, aggregated and classified. ii. The way information is presented iii. The capabilities of the users. Assumption that users have a reasonable knowledge of business and economic activities and accounting is made when financial statements are prepared.

Relevance
Relevant information is one that is able to influence the uses in decision making.
It has predictive or confirmatory value. Predictive value is where it helps uses or capital providers to form their own expectations about the future.
On the other hand, confirmatory value is when it is able to confirm of change in past (or present) evaluations or assessments.
When choices are to be made between relevant and reliable but mutually exclusive, the one that is most useful in decision making is chosen.
Reliability
The information is

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