Financial Accounting Reports Essay Example | Topics and Well Written Essays - 2000 words

Financial Accounting Reports - Essay Example The Financial Accounting Standards Board says financial reporting to be financial statements as well as other ways to communicate financial information related to the enterprise to the outside users. Financial reporting, compared to the financial accounting, is quite broader concept that encompasses the financial statements, the notes that are given below those statements and the disclosures. Financial statements are useful in providing important information to make decisions about the credit decisions and investments and also to assess the cash flow prospects. Information about the resources of the enterprise, its claim to these resources obtained and the changes that these resources undergo is also provided by the financial statements. Information provided by financial reporting is used by management and others who make economic decisions. Financial reporting primarily focuses on information about the earnings and the components it has. (International Financial Reporting Standards, 2013) Investors: these people make investments in the entity. They are interested about the security of their investments and potential profits in the entity. People interested in making investment in an entity make use of the financial statements, especially the income statement, with the help of which they can estimate the future incomes and performance of the entity they are interested to invest in. The solvency of the company and the financial strength will reveal whether their investments will be secured or not. Investors like unit trusts and pension funds are the most sophisticated and the largest group of investors. Lenders: they need the information about the entity’s financial strength and performance to know whether the entity will be able to pay them in future. This depends on how are the solvency conditions of the entity. They are shown by the balance sheet/statement of financial position. The entities may