Question

What are the expectations of studying advance corporate financial reporting course in relation to;

a) Debating the professional and eithical duties of the accountant.

b) Assessing the financial reporting framework

c) Assessing the financial performance and position of firms.

d) Preparing consolidated financial statements.

e) Explaining reporting issues relating to spcialized entities.

f) Discuss the implications of changes in accounting regulation on financial reporting.

g) Assess contemporary developments in financial reporting.

Answer 1

a) The professional and ethical duties of an accountant is to book the financials & keep records of the organisation in a systematic manner which gives a true and fair view of the financial statements of the organisation. The work performed by an accountant needs to be within the scope of the operations of the organisation and do not in any way result in misrepresentation of facts and all the applicable laws are adhered to the core.

b) The financial reporting should be in such a manner that enables the users of the financial statements in making decisions by assessing the organisation strengths, liquidity, ability to generate cash flows. The usefulness of financial information is enhanced if it is comparable, verifiable, timely and understandable.

c) To assess the financial performance of any organisation there are few factors which need to be assessed upfront. These are Gross Profit Margin, Net Profit & Net Profit Margin, Ageing Accounts Receiveble, Current Ratio, Cash Flow Statement & Leverage Ratio. Although the list is not exhaustive in itself but these must be assessed first to have an overview of the organisation's health.

d) The purpose of Consolidated Financial Statements is to present, primarily for the benefits of the owners and creditors of the parent, the results of operations and the financial position of a parent and all its subsidiaries as if the consolidated group were a single economic entitiy. Consolidated Financial Reporting is a big ask when you have higher number of subsidiaries and that too operating all over the world. The challenges one face is different softwares subsidiaries are using, currencies in which they are reporting to the holding company and the applicable tax laws. To overcome these challenges to some extent a standard is set for all the subsidiares when reporting to the holding company which allows holding company to have the data aligned as per the consolidated reporting standards.

e) Specialized entities are those entities whose operations are not common like any other entitiy, for example, a non profit organisation. When a NPO reports, focus can be on how the cash is generated, how the funds have been utilized. Another example is Charitable Institutions, as the law and reporting standards vary from country to country. How the funds have been used. The reporting of these organisations is altogether different from ordinary businesses as most of the standards are not applicable on these entities and they are governed by some specific reporting standards and applicable laws.

f) Changes in accounting regulation on financial reporting depends on various factors which forces either the organisation itself or the act to bring the change in the accounting regulations. These factors can be adjustments to systems, processes, internal controls, business practices, accounting requirements, etc. A very good example is GST coming to India and became applicable from 1st July 2017. It brought the changes in law, organisation's systems, processes, business practices and accounting. How the organisations adhere to the law with these kind of drastic changes and how it affects the financial reporting is a question of fact.

g) Development in Financial reporting pushes the firms to bring parity on the presentation of financial statements to allow the investors to closely assess the health of the organisation before investing their money. On the economic front, no country wants to be left behind as they want the Foreign Investors to invest their money in their country's organisations. Thus all the organisations need to be updated on the recent developments in their reporting of financial statements.