1. Contents of the book Part one: Framework, Theory and Regulation
Part two: Annual Financial Statements
Part three: Consolidated Accounts and the Multinational
Part four: Financial Analysis

2. Basics of financial reporting
Chapter 1
Basics of financial reporting

3. Contents Users of financial reports
Characteristics of useful information
Need for communication
Coherent framework
International dimension
Terminology and the English language

4. Learning objectives
Explain and discuss the scope of accounting in general and of financial reporting in particular
Describe the major types of user-published financial information and discuss the implications of their different needs
List and discuss the characteristics of accounting information that are likely to maximize its usefulness
Describe and apply the traditional conventions applied in financial reporting
Discuss and illustrate the internal coherence or inconsistency of these conventions

5. Accounting
The provision of figures about the performance and the financial position of an entity

6. Therefore accounting needs:
An effective and efficient data handling and recording system
The ability to use that system to provide something useful to somebody

7. Three fundamental issues
Who are the users of the accounting statements?
What is the purpose for which each particular type of user requires the information?
How can we provide the user with the information best suited to their needs?

8. Different types of users
Shareholders, investors
Loan creditor group
Employee group
Analyst-adviser group
Suppliers and trade creditors
Customers
Competitors
Government
The public

9. What kind of information do these users want?

10. Different users – different needs
Shareholders
Loan creditors
Employees
Return on the investment and risk involved
Possibility to repay loans and pay interest
Stability and profitability of the firm, employment and remuneration opportunities

11. Different users – different needs
Financial analysts
Suppliers and trade creditors
Customers
Competitors
Information to advise whether to hold, buy or sell shares
Ability to pay the amounts due
Going concern of the enterprise, corporate responsibility
Performance of the competition

12. Different users – different needs
Government
The public
To determine taxable income, to supervise regulation, to judge efficient allocation of resources
The viability of the company, the corporate responsibility

13. Summary of user needs
Many, although not all, of the information requirements are essentially forward looking
Different users, with different purposes, may require different information about the same items
Different users will require different degrees of complexity and depth
Not all the information required is likely to be included in financial accounts

14. Characteristics of useful information
Relevance
Understandability
Reliability
Completeness
Objectivity
Timeliness
Comparability

15. Accounting information needs to be understood by the user

16. Accounting communication is improved through the use of conventions

17. Financial Accounting Conventions
Business entity
Duality
Monetary measurement
Cost
Continuity (going concern)
Conservatism (prudence)
Consistency
Materiality
Objectivity
Realization of revenue
Matching

19. Accounting conventions are grouped in a coherent framework

20. Many standard setters develop a conceptual framework from which they derive the accounting standards

21. Communication of accounting information
Within one jurisdiction
Within the global economy: more problems to make accounting information understandable