Preparing GPFRs Public and Private Companies

Question: Discuss about the Preparing GPFRs for Public and Private Companies. Answer: Introduction General-purpose financial statements are issued all through the year that facilitates the investors and creditors to support their decision making process. A set of GPFRs comprises a balance sheet, owners equity or retained earnings statement, income statement and cash flow statement (Deegan, 2012). Such statements are called general purpose as it includes basic financial statements those can be used by people for several activities. The public companies are required to prepare General Purpose Financial Reports (GPFRs) as per Corporation Act 2001. These companies have to prepare such report at least once a year and communicate the same to its users. Several guidelines and regulations are required to be followed in the preparation of GPFRs. Conversely, private organizations along with certain exceptions do not require preparing GPFRs (Christensen Nikolaev, 2013). The objective of the essay is to explain the concept and relevance of GPFRs and IFRS. Moreover, the importance of true and fair statements in Australian financial reporting will also be explained. Importance of GPFRs General Purpose Financial Reports (GPFRs) are a set of financial statements in the form of financial reporting those are used by the companies for communicating the performance of their business with the people outside the organization (Mller et al. 2015). These reports are of great importance for the companies. Both the investors and the creditors can evaluate this set of financial reports in order to predict the companys future performance along with the organizations capability to get rid of its recent and future debts. All the public companies need to issue an audited set of GPFRs under the guidelines of Public Company Accounting Oversight Board or PCAOB (Chua et al. 2012). Most of the public organizations tend to issue quarterly earnings statements along with the annual financial reports. Such reporting offers the potential investors further financial information regarding the company that helps them in making efficient investment decisions. GPFRs offer information regarding the financial position of an organization that includes information on economic resources and claims against them. These reports also includes any alterations in its financial position that might be because of certain other factors like financial performance or some issues such as increasing debt (Cotter et al. 2012). Such information facilitates the users of the financial statements for recognizing the weaknesses and strengths of the company and evaluates its solvency and liquidity in addition to requirement for any further financing. Financial performance information provided by GPFRs facilitates the users of such financial statements to evaluate the management performance, companys ability to generate cash and the risks connected with the business and the ways these could affect the companys business (Ahmed et al. 2013). GPFRs help to review the cash flow information and evaluate its solvency and its capability to spend cash. Difference between GPFRs and Special Purpose Financial Statements A special purpose financial statement can be stated as any type of report, which is not understood as general-purpose financial report. A financial statement can be understood as an authorized record of the financial conducts of businesses, individual or other company over a definite time (De George et al. 2012). On the other hand, special purpose financial statements can be understood, as a collection of financial statements those are generated by employing a special purpose framework in order address the specific desires of definite users those who are likely to use them. They are not deemed to use by public companies at a large and for this reason; these have extremely confined use for people else except for the anticipated users. The difference between both of these reports is the special purpose framework (Zhang Andrew, 2014). Generally, reports those are prepared to be use by public is deemed to adopt a general-purpose framework. Special purpose financial reports are normally prepared to be used by internal users like the management staff or certain external users such as banks or the government bodies. If any report had a purpose to be of great use for the tax auditors, for illustration, then the special structure that is employed might probably be a tax regulatory structure. Several distinct groups and people might need financial reports for various purposes. If an organization is a reporting entity, it requires submitting a GPFR, which complies with all the applicable Australian Accounting Standards Board (AASB) and offers certain accounting ways and for presenting the financial information of the organization (Martnezà ¢Ã¢â€š ¬Ã‚ Ferrero et al. 2015). However, if an organization is not a reporting entity then it requires submitting special purpose financial statement that will require complying with certain accounting standards such as financial statements presentation, standards interpretation, accounting policies and cash flow statements (Weil et al. 2013). Relevance of True and Fair View in Australian Financial Reporting True and fair view in financial reporting indicates that the statements of finance are devoid of misstatements and sincerely represent the position and financial performance of the organization (Landsman et al. 2012). Even though true and fair view expression is not adequately mentioned in the Australian accounting literature, such expression can be explained as per the audit concept. The corporation Act 2001 has mandated that the financial report of Australian public organizations needs to comply with both standards of accounting and true and fair view of companys performance position (Dholakia, 2012). If certain conflicts takes place between these two requirements then true and fair view must be reflected upon through additional information included in the accounts notes. True indicates that the financial reports offered by a company are factually appropriate and are generated in accordance to applicable reporting structure like IFRS and these does not encompass any material misstatements hose can mislead its users. Misstatements might generate from certain material errors or transaction omissions and balances within the financial statements (Tarr Mack, 2013). Fair implies that the financial statements generate the necessary information faithfully devoid of any element of bias and they indicate the transactions economic aspects other than just the legal form. As per Australian financial reporting standards, generation of true and fair financial statements is largely recognized as one among the responsibilities of the companys directors (Palea, 2014). For this reason, auditors need to consider whether reporting responsibilities are fulfilled by the directors in the generation of true and fair financial reports at the time of offering an audit opinion. Company law of Australian jurisdictions necessitates the auditors to effectively mention in their audit reports whether in their view the financial reports offer a true and fair view of the companys financial position and performance. GPFRs Importance for Public Companies and Not for Private Companies Private companies are not subject to any financial reporting requirements under the Australian accounting standard. Unlike private companies, all the public companies are required to generate general-purpose financial statements. Public companies are entitled to prepare such report in comparison to private companies because of the need of legislation, founding documents such as trust deeds or the parent organization (Jackling et al. 2012). Public can also decide to generate these reports if they consider that doing so might be useful. GPFRs are designed in a way that could assist a wide base of users in their decision-making. The distribution of financial statements of the private companies is generally limited and in certain cases, financial statement users of the private companies have a capability to gain information that the public company investors do not. GPFRs standards if applied to private companies might not be relevant o the information needs of its users (Palea Maino, 2013). In the public sector organizations, the auditor-general offers assurance to its users that the information reported by the public companies complies materially with the required accounting standards and fairly indicates the financial performance of the companies for the period covered by the financial report. Standards of GPFRs are specially designed for the public benefit organizations rather than private companies as these companies serve the public interests and require complying with high quality standards of accounting those might be used by public companies globally (Dholakia, 2012). Concept of IFRS International Financial Reporting Standards (IFRS) is known as a structure of accounting standards; those are prepared by a not-for-profit and independent entity known as International Accounting Standards Board (IASB) (Zhang Andrew, 2014). The objective of IFRS is to offer an international framework for the ways in which public organizations generate and disclose their financial reports. IFRS offers general guidance for the generation of financial reports other than setting regulations for reporting those are specific to industries. IFRS is at some occasion confused with International Accounting Standards (IAS) those are older standards replaced by IFRS (Zhang Andrew, 2014). Having such international standard is especially vital for huge organizations those have subsidiaries in several nations. Adopting a specific set of globally accepted standards will simplify the accounting procedures by facilitating an organization to employ a single reporting language all through. A particular standard will also offer auditors as well as investors with cohesive view of finances. In the recent years, more than 100 nations require or permit IFRS for the public companies with increasing number of companies anticipated to transition to IFRS at the end of the year 2016 (Mller et al. 2015). The IFRS proponents as a global standard sustains that cost of implementation of IFRS might be offset by the compliance potential in order to enhance the credit ratings. IFRS intends to sustain transparency and stability throughout the financial world that encompass European Union and several nations of South America and Asia but not the United States. These standards supports businesses and individual investors for making educated financial decisions, as they are capable to view the recent business happenings of a company in which they are planning to invest (Dholakia, 2012). Global adoption of IFRS is suggested that could save money on alternative comparison costs and personal investigations along with facilitating free flow of information. Conclusion The objective of the essay was to explain the concept and relevance of GPFRs and IFRS. Moreover, the importance of true and fair statements in Australian financial reporting was also explained in this research essay. From the discussion, it was gathered that GPFRs offer information regarding the financial position of a public organization that includes information on economic resources and claims against them. Moreover, a financial report can be understood as a recognized record of the financial activities of businesses, individual or several companies over a predefined time. On the other hand, special purpose financial statements can be understood, as a record of financial reports those are generated by employing a special purpose framework in order for addressing the specific requirements of definite users those who require to use them. 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