Compare and contrast the types of information and its value to users, currently provided by the published profit and loss accounts and cash flow statements of UK companies.
Financial statements, as defined by the Oxford Business Dictionary are the “annual statements summarising a company’s activities over the past year...” These statements include, but are not limited to the Cash Flow Statement, the Profit and Loss Statement (Income Statement), and the Balance Sheet. According to the FASB (The Financial Accounting Standards Board), the financial statements of a firm should provide sufficient information to be useful to all stakeholders for example investors and creditors.
Financial statements are prepared periodically in accordance with a set of standards known as the generally accepted accounting principles (GAAP). These standards provide the framework of guidelines for financial accounting. It includes the standards, conventions, and rules accountants follow in recording and summarizing transactions, and in the preparation of financial statements. GAAP are imposed on companies so that investors have consistency in the financial statements they use when analyzing companies for investment purposes. It covers such things as revenue recognition, balance sheet item classification and outstanding share measurements. Companies are expected to follow GAAP rules when reporting their financial data via financial statements as the principles are geared at reducing variations in methods or principles used by the different companies by maintaining a level of comparability. They also ensure that there is full disclosure of all prepared materials and also that the information produced is accurate and meaningful.
The mission of the FASB (Financial Accounting Standar ...