Financial Accounting Corporate Report 1975
Essay title: Financial Accounting Corporate Report 1975
INTRODUCTION
In 1975 the Corporate Report was published, this was the outcome from the Accounting Standards Steering Committee’s wide ranging discussion paper and in part considered the usefulness of financial statements
(Dunn, April 2002) discusses that to meet their basic objective financial statements must be useful; and the information relevant and reliable. Information will have relevance if it influences the decisions of the users. Relevance and reliability are primary characteristics relating to content together with the threshold quality,materiality. The primary characteristics relating to presentation include comparability, clarity and understandability.
The Corporate Report in 1975 identified the major user groups listed below
Equity Investors
Lenders
Employees
The Analyst Advisor Group (financial analysts, journalists, economist’s statisticians, researchers, trade unions, credit rating agencies and stockbrokers)
The Business Contact Group (suppliers, customers & competitors)
Government
Public
The Users Of Financial Statements
Equity Investors can be
Existing investors
Potential Investors
Both existing & potential investors can be long-term or short-term investors with a sole purpose of increasing their wealth by way of capital gains (Via trading of shares/securities) or by earning dividends
Lender/Creditors often referred to as the loan creditor group are people who supply funds to the company either on a
Short term basis
Medium term OR
Long term Basis.
On short term basis the loan can be overdraft facility for a company but long term basis include heavy loans secured for future expansion or capital expenditures. The loan creditor group normally includes banks & discount houses which usually provides overdraft and other flexible fund management facilities to corporations, provided they have a sound financial performance backing.
Employees This group is considered to be the least affected of all when it comes to analyzing the companys accounts but they are the first to get a feel of an impact of changing circumstances in form of promotions, demotions or lay-offs.
The Analyst Advisor Group This group includes financial analysts, journalists, economist’s statisticians, researchers, trade unions, credit rating agencies and stockbrokers
The Business Contact Group
It consists of
Suppliers
Competitors
Customers
Suppliers This group comprises the trade creditors who are Suppliers of products and services to the company. They provide goods or services on credit terms to the company.
Competitors can be
Existing OR
Potential (New Entrants)
This group is comprised of rivals or operators other than the company in the industry offering similar products or services offered by the company.
Customers They refer to the end-user of goods or services produced by the company.
Government This group consists of regulators which deals or monitors that whether the company has met or fulfilled the statutory requirements as prescribed by law or not and to take necessary actions in case of breach of statutory requirements.
Public The public includes taxpayers, departments & agencies concerned with the supervision of commerce & industry and local authorities
The user needs and usefulness from the Financial Statements
The different users mentioned above have different needs which they try to seek to fulfil from the information therein contained in the financial statements of the company.
The different needs for different are discussed as under:
THE EQUITY INVESTOR GROUP This group (existing & potential) particularly seeks information to decide whether to invest or disinvest their funds from or to the company.
This group needs information for the future to undergo