Question

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Answer only one part from all of the questions below:

Question 2:

1. Critically discuss financial reporting and analysis. And explain the following:

* The GAAP ( Generally Accepted Accounting Principles)
* The IFRS ( International Financial Reporting Standards)

Answer 1

1. The financial reporting and analysis is a method of looking over a organisation's financial records to make decisions about the future of the organisation. This process consist of two main parts. In the analysis phase, the organisatin's records are examined and thier comparison with similar organisations, both current and previous year to find the correlationss between the current company with others. The Second phase, reporting ,involves taking  all the gathered information and condensing it down to just the relevant facts to make a proper decision.

The analyzer , during the course of his analysing and reporting gather as much data on the projects as possible and look for three things:

• Viablity: The viability portion of financial analysis and reporting relates to formation. This basically outlines the self-sufficiency of the area in question. If the area is only staying afloat because of a constant influx of money, material or talent from elsewhere, then it is not very self-sufficient. On the other hand, if the area does well on its own, then its self-sufficiency is high. The more viable the area is, the more likely it is to be successful over time.
• Stability: This is a measurement of how long a low-viability area will continue to function in its current state as well as the likelihood of its viability improving in time. With higher-viability areas, this attempts to forecast how well it can maintain its viability and the likelihood of its current situation changing.
• Profitabilty: This section looks at the current money going into and out of the observed area. The analyzer then decides how that money is being affected by the section’s viability and stability and whether changes to those areas will affect the future. This section relies heavily on market forecasts for the industry to find common trends.

Finally, the reporting part of the project brings all of this together into one final statement. In this final part, the analyzer looks at the information and makes a decision as to the future of the area. This statement is then turned over to the people in charge of the business, and they use it to assist in their decision making.

The GAAP ( Generally Accepted Accounting Principles):

Generally accepted accounting principles, or GAAP, are a set of rules that encompass the details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices.

GAAP guidelines incorporates 10 key concepts:

• Principle of regularity: GAAP-compliant accountants strictly adhere to established rules and regulations.
• Principle of consistency: Consistent standards are applied throughout the financial reporting process.
• Principle of sincerity: GAAP-compliant accountants are committed to accuracy and impartiality.
• Principle of permanence of methods: Consistent procedures are used in the preparation of all financial reports.
• Principle of non-compensation: All aspects of an organization's performance, whether positive or negative, are fully reported with no prospect of debt compensation.
• Principle of prudence: Speculation does not influence the reporting of financial data.
• Principle of continuity: Asset valuations assume the organization's operations will continue.
• Principle of periodicity: Reporting of revenues is divided by standard accounting time periods, such as fiscal quarters or fiscal years.
• Principle of materiality: Financial reports fully disclose the organization's monetary situation.
• Principle of utmost good faith: All involved parties are assumed to be acting honestly.

GAAP compliance makes the financial reporting process transparent and standardizes assumptions, terminology, definitions, and methods. External parties can easily compare financial statements issued by GAAP-compliant entities and safely assume consistency, which allows for quick and accurate cross-company comparisons.

Because GAAP standards deliver transparency and continuity, they enable investors and stakeholders to make sound, evidence-based decisions. The consistency of GAAP compliance also allows companies to more easily evaluate strategic business options.

The IFRS ( International Financial Reporting Standards):

IFRS standards are International Financial Reporting Standards (IFRS) that consist of a set of accounting rules that determine how transactions and other accounting events are required to be reported in financial statements. They are designed to maintain credibility and transparency in the financial world, which enables investors and business operators to make informed financial decisions.

IFRS standards are issued and maintained by the International Accounting Standards Board and were created to establish a common language so that financial statements can easily be interpreted from company to company and country to country.