RUNNING HEAD: Financial reporting framework 1 Financial reporting framework for unlisted firms Name: Institution: Date of submission:
Introduction Financial reports are the primary source of information for parties who are interested in the financial performance of various companies. The users of this information include investors-for investment decisions, creditors-to check company creditworthiness, and the government for tax purposes (Beaver, 1998). The process which companies disclose their financial reports are called financial reporting, and it is the role of the government and other financial stakeholders to provide the standard framework for the companies to report their financial performances (Beaver, 1998). This paper looks into the financial reporting framework for two countries and compares the two to establish the extent of their differences and similarities. The UK vs. Australian framework for unlisted companies Since the end of the financial crisis of the 21st century, financial reporting has been accorded some seriousness. This is because; some of the causes of such crises emanate from the inability of the financial statements to communicate risks to the users of various financial instruments. Financial reporting is an essential communicative process, and it should abide by the international accounting standards and the relevant economic policies. The United Kingdom has its framework for regulating financial reporting for unlisted companies. The country uses the UK Generally Accepted Accounting Principle (GAAP) to monitor its listed and unlisted companies. The state implemented the policy to allow companies, i.e., charity organizations to prepare their financial statements by UK GAAP or IFRS as required by EU (Demirag, 2017). EU adopted IAS Regulation in June 2002 that required the companies for its member nations, I.e., companies listed in EU security market, to prepare their financial statements by IFRS and
GAAP standards. Also, the regulation permitted the application of IFRS standards for unlisted companies. Since UK is a member of EU, then any economic decision made by the Union affects the country as well. The reporting framework requires the unlisted companies to report their financial statements honestly and give a real view of the company's financial position, i.e., if it is making losses or profits. This process may cost the preparer of the information time in preparing the financial reports and some financial expenses in hiring experts to compute the firm's net profits/losses.
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- Spring '16
- Mr. Kemoni
- Interest, Generally Accepted Accounting Principles, International Financial Reporting Standards, financial reporting framework