Completed notes of the course

Page 1

1 FINANCIAL STATEMENT RECOVERY: Introduction to Financial accounting: WHAT IS IT : Financial accounting is the branch of accounting intended fo r users outside the organization (External Accountability) . When we talk about financial accounting, we thus r efer to the act of reporting information on the organization in financial terms (Financial Reporting) . Financial Accounting is presented externally through mandatory financial reports. Financial reports provide information about the financial position, fin ancial performances, and cash flows of an entity . Financial reports include two time -frames documents: - Annual Report (published yearly, which is drafted according to principles defined by law (IAS/IFRS) - Interim reports (quarterly, half year) , which gives us information about a specific time frame . HOW (Rules): The annual report is drafted according to princ iples defined by law (IAS/IFRS), which are the references for the accounting standard system. The standard system is adopted by: Europe, Australia, New Zealand, Developing countries ; its objective is to describe and defining the process through which the annual report has to be drafted. The compulsory documents of the Annual Report f or IAS/IFRS are: – BALANCE SHEET ; – INCOME STATEMENT ; – CASH FLOW STATEMENT; – STATEMENT OF CHANGES IN EQUITY ; – NOTES TO THE FINANCIAL STATEMENTS . Listed companies (those in the stock exchange) are also requested to provide within Annual Report: – The report of external auditors, stating that the annual report gives a true and fair view of the situation of the company – The report of supervisory board, stating that the decisions undertaken by the company’s management are compliant with the normative and statuto ry requirements – A management report, providing the view…