Financial Reporting in New Zealand Essay Example | Topics and Well Written Essays - 2000 words

Financial Reporting in New Zealand - Essay ExampleTherefore, financial reporting provides information that assist investors, creditors, and others assess the amounts, timing, and distrust of prospective net cash inflows to the related enterprise. Decision makers uses information in the financial report on how to base investment, credit and other decisions underlies the objectives of financial reporting. A critical evaluation is done in relation to the usefulness of the financial reporting and the purpose it serves. This paper discusses if the provision of a true and fair cyclorama of an entitys financial position and performance is required by law. It shows the importance of conceptual framework and why we use regulations that are part of Generally Accepted account statement Practice (GAAP) to govern financial reporting in New Zealand.Companies, issuers and all public sector entities in New Zealand are required under principle to act with accordance with General Accounting Accep table Principles (GAAP) when presenting their external financial reports. According to New Zealand Institute of Chartered Accountants, they ensure that those involved in supply of financial reports of entities to comply with General Accounting Acceptable Principles (GAAP) and any nonconformity should be reported. (New Zealand Institute of Chartered Accountants, 2006) Generally accepted accounting principles (GAAP) are accounting rules that are used to prepare financial statements for publicly traded companies and private companies as well as non profit making organisations. The generally accepted accounting principles puzzle out under a opposite set of assumptions, principles, and constraints. GAAP ensures that the financial statements are useful to relevant users as they have the following essential qualities. Relevancy A relevant information assist users of the financial statements to predict the future event in relation to the present and the past. This information must be ava ilable in the lead the decision is made, so for this case they make a difference in decision making.Reliability The information presented in the financial statement should be certain i.e. if an independent auditor verifies it using the aforementioned(prenominal) method he should be able to get the same result.Comparable The financial reported should also be able to be reported in the same manner for a different organisation hence one can compare financial results of different companies. Consistent This means that the same accounting method applied should be the same from period to period should be well explained and justified. This allows comparison of financial statements of the same company of different periods. For GAAP to achieve its objectives, it is usually guided by basic assumptions, principles and constrains.The Assumptions includes Economic Entity Assumption There is an assumption that the business is