Importance of Financial Information to Stakeholders

Importance of fiscal In skeletal systemation to StakeholdersFinancial study contain in yearbook newspaper publishers that the companies ar published in boundically. That period is identified as reporting period. Company obligates to go out financial entropy to their various stakeholders during the past reporting period.Annual report is a report the play along report their comprehensive trans minuteions and events to publish and supply for postulate parties. There atomic number 18 few reasons to publish annual reports by companies loosely as follows.Because companies wee-wee legal obligation between companies and the governing body act implemented for companies is cognisen as company act 2007 No 7. The company acts section 150, 151, 152 and 153 has address the obligation to evolve financial statements, content and mark of financial statements, obligation to prepare group financial statements and content and form of group financial statements correspondly.Stakeholders of the company necessitate the financial tuition for succeeding(a) reasons.To know how well the company is doing.To fancy company has earned much money than they spent.To get an idea intimately strategic and tactical plans of the management.To provide information to make decisions who make decisions nearly organisatoin.Avoid dissimulations and corruptions of the judicature.Through the size up process, organisations will be able to identify weaknesses of their go of procedures and corruptions occurred due(p) to them.To detect and fulfill the financial extremitys from monitory markets via financial equipments such as shares, debentures, jargon loans and etc.1.1. Importance of Financial Information to StakeholdersHowever the financial information require by stakeholders of the organisation. Stakeholder of the organisation puke divide into two. The bellow chart represents the stakeholders of the organisation correspond to the environment they belongs to.Stakeholders of the OrganisationExternal stakeholdersa). Suppliers and Trade creditorsb). politicsc). Consumersd). Publice). MediasInternal Stakeholdersa).Directors Managersb). Shareholdersc). Employees(Diagram 01)Above chart shows the deviation of stakeholders of the organisation and they require financial information due to various purposes.1.1.1. Directors and ManagersTo make decisions about the organisation in different time and in different level. Directors and managers of the organisation are taking different types of decisions as follows.About new investment and image appreciation decision.About continued and discontinued operations.Dividend decisions.Diversified business decision. idle words up decision.To establish overall objectives and periodical targets.To avoid dissimulations and corruptions.To establish squired systems and strengthens control of procedures.To increase the productivity level of the organisation.1.1.2. ShareholdersTo determine whether their investment will be sold, Holt or bought more shares of the fundamental law.To decided the fairness of the returned for their investments.To determine the going business organization of the organisation.To obtain wide knowledge about the organizational activities.To compare their investments and their benefits with new(prenominal) competitive organizations and industries.1.1.3. EmployeesTo know about the stability and profi remandness of the employer.To know about remuneration, retirement benefits, and employment opportunities are in organisationTo check into the gambol security with the current employer.To ensure the fairness of the salaries and wages they obtain from the organization according to their earnings.To have a clear view about otherwise operations of the organisation.1.1.4. SuppliersTo ensure their payments of supplies will be received on due.To ensure the stability of their customers.To have knowledge about other products and their suppliers of the organisation.To compare their deed wi th existing and other companiesTo find other competitive suppliers and their contribution towards the organisation.To find opportunities to supply more.1.1.5. GovernmentTo collect accurate taxes and amounts from organizations on due dates.To provide government benefaction to improve their business.To obtain financial and non-financial assistance for government development projects.To ensure the organizations oversee their employees in reasonable way.To ensure the organizations entry with government rules, regulations and acts that established by the government.1.1.6. ConsumersTo have knowledge about the appeal structure of the products that the organisation is producing.To ensure the stability of the organisation.To know about the organizations profitability, because profitability is a shed light to know about products impossible growth, improvements, outflank customer service and low price strategic implications.To know about CSR programs conducted by the organisation.1.1.7. Pub licTo conscious about organizations substantial contribution towards the society.To know about the opportunities to link with the organisation.To know about CSR contribution towards the country.To conscious their activities which female genitalia be touch to interest of the nature and the country.2. Standards requirement for published Financial disceptationsThe entire organizations oddly registered in Sri Lanka unavoidableness to prepare their financial statements according to the requirements of the accounting standard issued by the shew of Chartered Accountants of Sri Lanka (ICASL). ICASL is responsible for prepare and issue all accounting standard which are relative and required to prepare financial statements.The entire organizations need to be adopted and form with the accounting standard which issued by the ICASL and need to mentioned low the notes to the financial statements of their annual report. This note can identify as Note of Compliance. As an good example Ric hard Pearis PLC has mentioned their note of compliance as follows.The Financial Statements of the Company and the Group, comprising the Balance Sheet, Income Statement, Statement of Changes in Equity, the Cash Flow Statement, Accounting Policies and Notes to the Financial Statements are prompt on the basis of the historical cost conventions, and in conformity with for the most part Accepted Accounting Principles and Accounting Standards laid down by the Institute of Chartered Accountants of Sri Lanka. These principles and standards have been applied consistently with that of the previous year. No adjustments are made for inflationary factors affecting these Financial Statements.There is a be given of accounting standards. Its consisting with 28 LKASs and 8 SLFRSs. (See appendix 01).2.1. LKAS 8 Accounting Policies, Changes in Accounting Estimates and ErrorsAs per the requirement of LKAS 8 all of the companies need to mention their accounting policies estimates that they have used to prepare their financial statements during the reporting period. Because due to the change of any policy of the company will be affected retrospectively and caused to restated of comparative information unless it is impracticable to do so. Appendix 02 represents operative accounting policies and estimates that use by Richard Pearis PLC.2.2. SLFRS 8 run SegmentsAs per the preceding(prenominal) standard company may have some operating segments. Operating segment can define as followsOperating segment is a component of an entity,It may earns revenue and incur expenses to the organisation,Operating results are bring around by board of directors andDiscrete financial information is available.Bellow table shows the segmental operations of Richard Pearis PLC.(Table 01) (Richard Pearis PLC, (2012). Financial Statements In (ed), Arpico Annual Report. 2012 Sri Lanka pp.41.)2.3. LKAS 34 slowdown Financial Reporting.LKAS 34 requires preparing interim financial reports due to timely an d true(p) interim financial reporting improves the ability of investors, creditors, and other to understand an enterprises faculty to generate earnings and cash menstruates and its financial conditions and liquidity. Richard Pearis PLC prepares their interim financial reports according to the following financial colander.2.4. SLFRS 4 Insurance ContractsThis standard is applied more or less all insurance contracts that an entity issues and to reinsurance contracts that it hold. This is not applied to other assets and liabilities such as covering under the scope of LKAS 39 financial instruments recognition and measurement. wherefore company need to disclosure following information as requirement of this standard.Accounting policies for insurance contracts and related assets, liabilities, income and expenses.The recognized assets, liabilities, income, expenses and cash flows arising from insurance contracts.If the insurance company is a cedant, certain additional disclosures a re required.Information about assumptions that have the greatest effect on the measurement of assets, liabilities, income and expenses including, if practicable, quantified disclosures of those assumptions.The effect of changes of assumptions.Reconciliations of changes in insurance liabilities, reinsurance assets and if any related deferred acquisition cost.2.5. SLFRS 6 Exploration for and Evaluation of mineral ResourcesUnder this standard affected activities such asThe search for mineral ,Determination of the technical feasibility and commercial viability of extracting those resources.Following are specially excluded from the scope of the SLFRS 6Expenditures incurred before the entity has obtained legal rights to explore in a specific area andExpenditure incurred after the technical feasibility and commercial viability of extracting a mineral resource are demonstrable.The accounting policy that entity can apply for mineral resources areAll expenditures related to exploration and military rank assets need to incur to profit and loss and first recognition of the asset required to measure at cost, subsequently whether cost or review article model.Exploration and evaluation assets need represent in balance sheet, if its carry through LKAS 16 requirements under property fixs and equipments or if its satisfy LKAS 38 requirements under intangible asset assets.2.6. LKAS 16 Property Plant and EquipmentsProperty, Plants and Equipments (PPE) are tangible items that atomic number 18 held for use in the ware or supply of goods or services, for term of a contract to others, or for administrative purposes andAre expected to be use during more than one accounting period.(Mapitiya, (2011). Definitions of Standard In Gayan (ed), LKAS 16 Property im whole caboodle and Equipment. 1st ed. 2011 Sri Lanka pp.4.)The cost of assets of an item of PPE shall be recognized as assets if and further ifIt is probable that future economic benefits generate with the item will flow to the entity.The cost of the item can be measured reliably.All property, plant and equipments require to represent in balance sheet under non-current assets and need to be valued whether cost or revaluation model.Every property, plant and equipment need depreciate. Depreciation can define as systematic allotment of the depreciable amount of an asset over its useful life.Depreciable Amount = Cost-Residual Value reusable life of the asset is the period the entity is expected to use. It will be deviate from each and every asset. Company can use different types of derogation methods that mentioned in the standard. They areStraight line method.Reducing Balance method.Units of production method.2.7. LKAS 38 Intangible AssetsIntangible Assets are that identifiable non-monitory assets without any material substance.(Jayasigha, (2011). Intangibla Assets In Dimuthu (ed), LKAS 38. 1st ed. 2011 Sri Lanka pp.2.)There are three critical features of intangible assets. They are