Contribution of relevance and reliability on financial reporting Essay

Contribution of relevance and reliability on fiscal reporting - Essay eventMain objective of accounting policy is to produce upright valued accounting information that is highly reliable and relevant to the purpose and objectives of financials statement. Financial statements be the most distinguished components of annual report that all public limited companies publish each year for the stakeholders of the company. The financial statements need to be the fair and honorable representation of financial details of all activities performed by the companies. Financial information is responsible for financial decision making by the investors, creditors, suppliers etc. Most important is investment decision making by the investors. So, relevance and reliability need to be two most important characteristics of financial statements of any organizations. These determine the smell of financial reporting. Main objectives of financial statements are to provide fairly reported and audited fin ancial information to the shareholders of the organizations. So, users of financial statements consider it as reliable and relevant sources for taking decision for any financial purposes like investment, credit, supply etc. So, being a highly responsible for financial decision making, financial statements need to be relevant and reliable. ... So, all these external stakeholders of a company are highly reliable on its financial reporting which truly represents the companys real value and performance. Internal purpose of financial reporting is to retain standardized record of financial activities done by the company in a continual interval of time i.e. take outly, half yearly and yearly. It helps the organizations to evaluate its performance at the end of each financial year and also the end of each quarter of a financial year (FASB, p.15). Companies develop future business strategies based on the past performance of the company which can only be thinkable to evaluate from the fi nancial reporting of past quarter or past financial years. Companies change strategies and planning for implementing new activities for next quarter and next financial years and they also develop budgeting for next financial years by analyzing previous years projection verses actual results. All these are possible because of maintaining fair valued financial reporting. (Narotama University, p.135). Financial statements published by the companies provide valuable information to the investors, shareholders, creditors, suppliers so that they can track the value with respect to time and uncertainness of a business entity. Future performance of a firm can be assessed by the future cash inflow and cash outflow into a business. The elements of financial statements like income statement, balance sheet and cash flow are very important to evaluate companys performance and financial health. Investors are the most important users of financial statements. From financial statements, they assess the stewardship of management to an