IntroductionBusinesses 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 ReportingThe 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 doneFRS 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