FINANCIAL REPORTING

FINANCIAL REPORTING

1. ROLE

   • Intermediaries
     • Financial
       • Inv. opportunities
     • Information
       • Auditors & Analysts and rating agencies
     • Allocation of savings to investment opportunities

2. INFLUENCED BY

   • Business Activities
     • Business environment
       • Business strategy
   • Accounting System
     • Accrual Accounting
       • Distinguishes between expected costs and benfits and actual payment and receipt of cash
     • Accounting Conventions and Standards
       • Limit potential accounting distortions
       • Eg. Generally Accepted Accounting Principles (GAAP)
       • Eg. International Financial Reporting Standards (IFRS)
       • Reduce managerial flexibility
     • Managers´ Reporting Strategy
       • Accounting and disclosure policies
     • Auditing
       • Verify the integrity of the reported financial statements
       • Constrains the accounting rules and conventions
       • Legal environment
       • Governance structure (independent audit committee)
       • Sarbanes-Oxley Act
     • Accounting environment
       • Accounting strategy

3. ANALYSIS

   • Business Strategy
     • Key success factors
     • Key business risks
   • Accounting
     • Identify accounting flexibility
     • Recast the accounting numbers
   • Financial
     • Evaluate the current and past performance
     • Assess the sustainability
     • Ratio & Cash flow analysis
   • Prospective
     • Forecast into the future