Financial Reporting Systems and Economic Development Essay

Financial Reporting Systems and Economic Development - Essay utilizationThe role of the financial reporting system, as supported by method of accounting standards, the law and the ethics, in economical development is reviewed and analyzed in this paper. Particular emphasis is given on skinny representation, as an index of the reliability of financial statements. Also, the circumstances under which true and fair override apply argon set and explained. It is proved that faithful representation, in its current form, is something more than simple a compliance with accounting standards. whizz of the most critical issues when having to evaluate the quality of financial statements is that these statements should achieve faithful representation. In order to watch the role of faithful representation, as an element of the financial reporting systems, it would be necessary to confab to these systems, as the basis on which a firms financial practices are usually based. In accordance wit h Uddin et al., two major financial reporting systems are considered as the most credible for businesses in all sectors the US Generally Accepted Accounting Principles (US GAAP) and the IFRS.1 The practise of one of these systems, which have been appropriately well-tried as of the effectiveness in financial reporting, results to the increase of credibility of the local economy. From this point of view, it has been proved that the use of these systems within a particular country leads to the increase of the foreign direct investment (FDI) to the above country. Thus, accounting standards and financial reporting are closely related to the performance of the local economy, of course under the terms that global financial markets are stabilized, i.e. that these markets do not suffer from delays in the implementation of financial and opposite projects. In the literature the term faithful representation has been given various explanations, which are all similar. For example, in the stud y of Hussey reference is made to the use of the term faithful representation in order to steer the reliability of the financial statements involved.2 In other words, the specific term is used in order to prove the fact that the information included in the financial statements is accurate and responds to the actual financial status of the organization. by from reliability, the term faithful representation also reflects the completeness of information included in the financial statements.3 The financial statements are considered as complete when they include all necessary information.4 A similar approach in the commentary of faithful representation is included in the study of Needles et al. In accordance with the above researcher, the term faithful representation means that the financial statement involved is complete, neutral and free from error.5 It is further explained that the idiomatic expression free from error does not imply the full accuracy of the particular financial st atement, as much(prenominal) requirement is quite difficult, almost impossible, to be achieved since financial statements are highly based on estimations.6 At this point, the following problem appears how the reliability of financial statements is proved? The fact that there are some proceeding that cannot be measured, at least not precisely, is highlighted in the study of Hussey.7 On the other hand, the availability of the entropy involved is an issue that needs to be carefully considered when having to