Preparation and Presentation of Financial Statements

​The IASB framework for the preparation and presentation of financial statements outlines the concepts underlying the preparation and presentation of financial statements by external users (Deloitte 2008). The framework assists the board in the formulation of accounting standards and seeks to resolve issues that are not addressed directly in the international accounting standards. Its purpose is to set forth the basic concepts that underlie financial statements while defining the objectives of financial statements, its qualitative characteristics, concepts of capital and capital maintenance, as well as the measurement of the elements from which the financial statements are constructed (Deloitte 2008).

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​The purpose of the IFRS framework is to assist the international accounting standards board in the development and improvement of future international financial reporting standards as well as the constant review of existing IFRSs. The framework assists the board in the promotion of harmonization of regulations accounting standards and procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments permitted by IFRS (Deloitte 2008). The framework further provides guidelines that assist various national standard-setting bodies in developing national standards and assists with financial statements preparers in the application of IFRSs and in dealing with issues that have not yet been incorporated in the international financial reporting standards.

​The IFRS framework provides a means through which auditors can assess the conformity of financial statements to the IFRSs and further provides assistance to users of financial statements in their interpretation of information prepared in line with the international financial reporting standards. Besides, the framework provides information regarding the activities of the international accounting standards board and clearly outlines its approach to the formulation of international standards (Deloitte 2008).

​Qualitative characteristics in the IFRS framework are the attributes that make the financial statements useful to users and are comprised of understandability, relevance, reliability, and comparability (Nandakumar 2009). Financial statements should be presented in a clear and precise manner to promote understandability among users. Investors may not necessarily be qualified in accounting. Consequently, the financial statements should be presented in such a way that investors and other users, regardless of their level of knowledge in business and accounting, can easily understand the content.

​The framework requires the information provided by the financial statement to have the ability to influence users’ economic decisions and that such statements should be provided to the target users promptly to influence their decisions. Information is regarded as having the quality of relevance only when it can influence the economic decisions of investors which is enhanced by the ability to predict and confirm business trends. The information provided by the financial statements should be reliable to provide investors with accurate information to assess risk (Nandakumar 2009). Consequently, it should be free from errors and bias and should accurately represent the transactions within the bounds of materiality and costs. Any understatements may negatively impact investment decisions while overstatement may reduce the rates of return resulting in loss of confidence. Finally, the financial statements generated should be comparable across nationalities and entities. This enhances the investors’ ability to assess the most appropriate venture through analysis of financial information.

​Reference List

​Deloitte, 2008. IGAAP financial reporting in Malaysia, CCH Asia Pte Limited.

​Nandakumar, A. 2009. Understanding IFRS fundamentals: international reporting standards, New Jersey: John Wiley & Sons.

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StudyCorgi. (2021, March 5). Preparation and Presentation of Financial Statements. Retrieved from https://studycorgi.com/preparation-and-presentation-of-financial-statements/

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"Preparation and Presentation of Financial Statements." StudyCorgi, 5 Mar. 2021, studycorgi.com/preparation-and-presentation-of-financial-statements/.

1. StudyCorgi. "Preparation and Presentation of Financial Statements." March 5, 2021. https://studycorgi.com/preparation-and-presentation-of-financial-statements/.


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StudyCorgi. "Preparation and Presentation of Financial Statements." March 5, 2021. https://studycorgi.com/preparation-and-presentation-of-financial-statements/.

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StudyCorgi. 2021. "Preparation and Presentation of Financial Statements." March 5, 2021. https://studycorgi.com/preparation-and-presentation-of-financial-statements/.

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StudyCorgi. (2021) 'Preparation and Presentation of Financial Statements'. 5 March.

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