Financial Reporting Quality When investors employ capital both physical and human in a business they expect to derive returns in every period the company is in existence. However the owners of the company are usually not the managers of the company especially for big corporation. For the owners of the company to have a view of how the company is operating they require managers of the company to prepare periodic financial statements which reflect the operations of the company. The International Accounting Standards Board (IASB) issue guidelines on how financial operations of a company should be reported. However managers can capitalise on loopholes in the standards and can exercise widest discretions which result in manipulation of earnings. Such information will mislead investors and can lead to financial problems to companies in the long run. Financial reporting quality refers to the accuracy with which a company’s reported financial statements reflect its operating performance and to their usefulness for forecasting future cash flows. Therefore financial analyst and SME owners and investors at large should benefit from understanding the financial reporting quality of companies, our next post.
Posted on: Thu, 10 Oct 2013 07:50:44 +0000
Trending Topics
Recently Viewed Topics
© 2015