The Influence of Accounting Standards on Financial Reporting for Business

Accounting Standards on Financial Reporting Asim Mehmood  |   2 mins read July 4, 2022 | 73 eye icon

Financial reporting is the financial results of an organization that are released to its stakeholders and the public. This reporting is a key function of the controller, who may be assisted by the investor relations officer if an organization is publicly held. Financial reporting is a crucial process for companies and investors, as it provides key information that shows financial performance over time. Government and private regulatory institutions also monitor financial reporting to ensure fair trade, compensation, and financial activities.

Typically, recording financial activities on several key statements, which others can use for review. The purpose of Financial Reporting is to expose you to the concepts and terminologies necessary to understand financial statements and regulatory capital requirements. In addition to imparting knowledge and skills in understanding and applying accounting standards and the theoretical framework, it provides insights into the preparation of financial statements, including groups, and how to analyze and interpret them.  

Regulatory entities, including the SEC, IRS, and Financial Accounting Standards Board (FASB), establish standards that outline protocols and required practices relating to financial activities and documentation. The SEC is responsible for overseeing capital markets and sets forth regulations for investment activities in stock markets. Depending on the type of business, capital market activity, and funding, the SEC requires public companies and market participants to disclose financial information regularly for investors to review

The FASB is a private regulatory entity that establishes and monitors the Generally Accepted Accounting Principles (GAAP). The GAAP provides a framework for financial processes that supports efficiency in reporting and ensures regulatory compliance with other standards. 

If a business is publicly held, financial reporting also includes the quarterly Form 10-Q and annual Form 10-K, which are filed with the Securities and Exchange Commission. The annual report that is issued to shareholders could be a stripped-down version called a "wrap report." Reports may also include press releases that contain financial information about the company. Finally, a public company may engage in earnings calls, during which management discusses the company's financial results and other matters.

Accounting standards contribute to the credibility of financial statements and enable enterprises to undertake informed decisions based on explicit financial information. It is the accounting standards that safeguard investors' interests against misrepresentations in financial statements and facilitate financial disclosure.

Asim Mehmood
MPhil in Accounting and Finance, Adjunct Faculty


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