General-Purpose Financial Statements Free-Samples for Students

Question: Discuss about the Purpose of Financial Statements and Reports. Answer: General-purpose financial statements Released by the organization to assist the creditors and investors in the process of their decision making. GPFRs are important as it provides the required information to the users of GPFR that are found to be useful for analysing and taking decisions related to the assignment of scarce resources. After meeting this objective the GPFR also determines through which governing bodies and management the responsibilities and their accountability will be discharged (Birt et al., 2014). The main purpose of the GPFR is to provide the financial information regarding the reporting organization that can be used by the potential and the present investors in equity, creditors and lenders for taking decisions related to their investment. Shareholders require the GPFR to analyse their investment and assist them to make further decisions regarding voting in corporate matters. The importance of GPFR with regard to the financial reports is to offer financial position, financial performance and any cha nges in the financial position of the entity that are useful for making economic decisions (Cascino et al. 2014). The Special purpose financial reports Prepared in any virtual format that are required by or preferred by the business. Normally, as the minimum requirement, under this method at least balance sheet and profit and loss account is prepared. However, they can be aligned with various degrees of other requirements regarding the reports that are established by the members or owners or directors of the organization (Carey, Potter Tanewski, 2014). The General purpose financial reports The reports that are prepared by using the AASBs guidelines and generally follow a specific format, though there still remain some scopes to alter this. These reports are generally prepared by the organizations through using the Corporations act and through application of the accounting concepts 1 and 2. As per normal guidelines, any organization that has foreign ownership, huge number of employees, and expects large number of end users those are dependent on the financial reports of the organization, and then the GPFR may be required to be prepared. However, the interpretation and application of these regulations may vary based on the organization (Henderson et al., 2015). However, a superior accounting organization shall provide an expert team with high skills to help the business for preparing all the accounts to meet the needs of the users on timely manner with minimization of cost. Most of the public companies are required to issue GPFRs. The requirements of doing this are set by the parent organization, founding documents like trust deeds, legislation or any other responsible minister. Organization can also choose to prepare the reports, if they feel that doing so will be useful. Generally, the legislation needs that the information included in GPFR must comply with the GAAP or generally accepted accounting practices. GAAP is the overall content of accounting standards and other related guidance that forms the strategy regarding how the organization shall prepare the GPFRs. Generally, the accepted accounting standards are a set of requirements and principle objectives that does not depend on the preference of the preparer. Furthermore, in public sector, the Auditor-General ensure the users that the key information of the public organization are materially complied with the accounting standards and presented in a true and fair manner. On the other hand, the pri vate companies are not required to prepare the GPFR as the external investors do not take part in the daily activities of the business and the audited financial statements are sufficient for them to obtain reliable information regarding the performance of the business. The true and fair aspect in auditing state that the financial reports are free from any error or material misstatement and the financial position and performance of the organization is faithfully represented. Though the term of true and fair is not defined strictly in the accounting literature, the following aspects are derived as the explanation of the terms True recommends that the information related to the financial reports are literally correct and is prepared as per the applicable framework like IFRS and they are free from any error or material misstatement that may misguide the users. The material misstatement arises from the material omissions, errors of balances and transactions in the financial reports. On the other hand, the term Fair suggests that the financial reports are presented faithfully and they are free from bias and reflects the transactions economic substance rather than just revealing their legal aspect (Bengtsson Wallstrm, 2014). Preparation of the financial statements as per the true and fair view is recognized as one of the most crucial tasks of the directors of the organization. Moreover, the auditors must consider whether the directors have complied with their responsibilities for the presentation of true and fair view while preparing the financial statements (Vyas, Ambadkar Bhargava?, 2015). The International Accounting standard Board (IASB) is an independent body for setting the IFRS foundation. All the meetings of IASB are carried out in webcast and public. In the procedure of setting of the standards the IASB comply with the transparent, open and thorough procedures for which the exposure drafts, discussion papers and public comments are important. The IASB connects with the shareholders closely around the globe that includes business leaders, regulators setters of accounting standards and the professionals associated with accountancy (IFRS - International Accounting Standards Board (IASB), 2017). The IASB has a neutral transaction policy that means the similar events and transactions shall be accounted for in a same way by all the entities irrespective of non-profit organizations or profit organizations or the private organizations, unless there is a valid reason for treating in a different way. The IASB takes into account the specific requirement of the private and public sectors while implementing revised or new IFRSs for adopting in Australia (Christensen, Hail Leuz, 2013). Reference: Bengtsson, M., Wallstrm, J. (2014). Accounting and disclosure of football player registrations: Do they present a true and fair view of the financial statements?: A study of Top European Football Clubs. Birt, J., Chalmers, K., Maloney, S., Brooks, A., Oliver, J., Janson, P. (2014). Accounting: Business Reporting for Decision Making 5e. Carey, P., Potter, B., Tanewski, G. (2014). Application of the reporting entity concept and lodgement of special purpose financial statements. Cascino, S., Clatworthy, M., Garca Osma, B., Gassen, J., Imam, S., Jeanjean, T. (2014). Who uses financial reports and for what purpose? Evidence from capital providers. Accounting in Europe,11(2), 185-209. Christensen, H. B., Hail, L., Leuz, C. (2013). Mandatory IFRS reporting and changes in enforcement.Journal of Accounting and Economics,56(2), 147-177. Henderson, S., Peirson, G., Herbohn, K., Howieson, B. (2015).Issues in financial accounting. Pearson Higher Education AU. IFRS - International Accounting Standards Board (IASB). (2017). Ifrs.org. Retrieved 18 April 2017, from https://www.ifrs.org/About-us/IASB/Pages/Home.aspx Vyas, A. H., Ambadkar, R., Bhargava?, J. (2015). True and Fair View-A Fact or Illusion in the World of Creative Accounting.International Journal of Multidisciplinary and Current Research,3(3), 572-575.