Menu

Using the statement of accounts and published performance information for two companies of your choice operating in the same business compare and discuss the effectiveness of the financial information for a range of users of financial accounts

0 Comment

e quality of financial reporting is determined in relation to usefulness of the financial information t necessary for making credit, investment, and similar decisions (Jonas and Blanchet, 2000). The FASB defines the following qualitative characteristics of useful financial information: relevance and reliability. Shareholder/Investor Protection category consists of actual shareholders and investors. For this category, quality financial reporting is presented in full and transparent fashion that is not designed to bewilder or mislead users (Jonas and Blanchet, 2000). While some of the criteria for the shareholder /investor category are similar to those for user needs category, there is a fundamental distinction between the two categories (Jonas and Blanchet, 2000).
Beest, Braam, Boelens (2009) have summarized the needs of both categories that were previously combined by Jonas and Blanchet (2000) and designed a framework which allowed users of financial information to assess the quality of company’s reporting. The key qualitative characteristics include: relevance, faithful representation, understandability, comparability and timeliness. This framework will be used in order to evaluate quality of the financial information published by two automobile-producers: BMW and Mercedes-Benz.
The first characteristic of the quality of financial reporting that needs to be assessed is relevance of the information presented in financial reporting. Under this category is assessed information which enables investors to form expectations and predictions concerning the company’s future (Beest, Braam, Boelens, 2009). In order to measure predictive value of the financial reporting information there are taken into consideration three items: forward-looking information, information in terms of risks and opportunities, company’s use of fair value (Beest, Braam, Boelens, 2009).
Forward-looking statement provided in the annual report of BMW does not have an apart subsection. Because