Lahore School of Economics

A distinguished seat of learning, teaching and research

Financial Reporting and Modern Business

Jaffar Hussain, FCA

Financial Reporting is fundamentally an aid for informed decision making and accountability. The huge business of today would not have been sustainable without effective financial reporting. The art and science of preparation of financial statements have come a long way during the last 25 years. These financial statements have become very elaborate, informative and incisive. The genesis of modern day financial accounting and reporting, lies in the advent of multi-nationals. Need for uniform accounting practice was felt greatly and the users of financial statements also needed, among other things, transparency into the affairs of an entity, especially those using public money. Thus a common platform for accountants around the world was created and International Financial Reporting Standards and International Standards on Auditing were developed to achieve the objectives of uniformity and fair presentation. Since then business managers and investors are in a position to do better analysis of performances of the business and are in a position to make quality decisions. Sometimes we learn about the importance of something when it is not present. People world over understood the importance of sound accounting practices which should provide rules for recognition of all assets which an entity owns and all liabilities which are its obligations after the sad incident of Enron. Since Enron, not only accountancy profession but legislators and regulators also have come a long way towards rectifying the matters which led to Enron. We accountants have done a lot in ensuring that all that which belongs to an entity should be there in its financial statements. Thus, during the last 15 years i.e. since Enron, accountancy profession has brought a lot of changes in the basis of preparation of group financial statements and in the recognition and measurement of financial instruments. The latter has brought momentous changes in the very framework which is used for preparation of financial statements. For financial instruments, accountants recognize an asset or a liability right at the time of contract rather than at the time of actual transactions. The journey of progress is continuing to meet the information needs of users of financial statements. The world believes that a business entity cannot have good governance without the transparent and reliable financial reporting. This world also believes that a country cannot also be governed unless the policy makers and regulators have an insight into the affairs of business of that country which they can have only through the financial statements of those entities.

Mr Jafar Husain has been a member of ICAP for the last 25 years. After qualifying as a chartered accountant he entered into public practice and continued his practice for 8 years. However, teaching was his passion. This led him to join the field of education and training on full time basis. Today he is head of a renowned accountancy school, The Professionals’ Academy of Commerce. He has special interest in Auditing and Financial Accounting. He has been a trainer of FBR offices and has imparted training of auditing and accounting to hundreds of officers. He is a regular trainer in ICAP’s Continuing Professional Development Programme. He is also a member of ICAP’s Education and Training Committee.

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posted by S A J Shirazi @ 5/30/2014 02:30:00 PM,

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