CORPORATE REPORTING -TAXATIONThe reporting entity has been an entity that has been providing the financial statements as a source or information about finance and that would be given to external users. The reporting entity has been determining the activities that would be covered by the financial statements and that would include the operations also. The reporting entity for the financial statements has been prepared normally on the broader terms and that would be normally considered for the non-profit sector. There would be separate legal entity for the relevant legislation that would be specifying the reporting entity and the nonprofit organizations would not be having any branches and they would be conducting activities normally through groups or organizations. Many businesses would be done in legal structure, like a corporation, trust, partnership or incorporated society.
The legal structures would be helping to identify normal list that should be included in the financial reports that would distinguish it from the equity investors, lenders, and other creditors. Legal structure would be helping to establish the boundaries of the reporting entity. It has been seen that all business would be operating through legal entities.
Like said in the example above, the small business would be functioning as sole proprietorship that would not be a legal entity and would be presenting general purpose financial reports, and that can be termed as, when seeking funding from a bank for loan purpose or when giving financial information to prospective purchasers of the business. (Financial Accounting Standards Board of the Financial Accounting Foundation, 2008) There would be difficulties that would occur when the legal entity was controlled by another legal entity and, the degree of integration between the two legal entities has made it difficult to distinguish between the resources of the controlled entity and those of the controlling entity.
(Financial Accounting Standards Board of the Financial Accounting Foundation, 2008) There have been certain branches that would be part of the overall legal entity; they would be included in the overall entity’s financial reports. That means in the normal process there would be separate legal entities for the nonprofit entity and that would be controlling the branches or would be having influence. That means the overall entity would be having control, the branches would be normally accounted for as subsidiaries; and that means the branches would be accounted for associates in the financial statements of the overall entity. The SAC 1 definition of a reporting entity would be based on user information needs, it would be seen necessary to first specify what particular information needs are relevant, and that would then provides the basis for determining the necessary entities to prepare financial reports to satisfy the information needs. ( International Accounting Standards, 2005)SAC 2 had identified the three crucial elements of the general purpose financial reporting model.
That mean it would be identifying the users of general purpose financial reports and that means who would be requiring information. The other purpose for the users would be requiring information and that can mean why information is needed and that means what information is needed. ( International Accounting Standards, 2005)