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Analyse the context and purpose of financial reporting

Post Date: 18 - Aug - 2023

Unit13:      FinancialReporting



Unitcode   K/508/0526


Unitlevel 5

Credit value      15



Theoverallaimofthisunitistodeveloptheknowledge,understandingandskills whicharerequiredinthepreparationoffinancialstatements.Studentswillbecome awareoftheappropriatefinancialstandardswhichinfluenceandinformthe productionoffinancialstatements.Theywillalsoexploretheconceptualframeworks for financial reporting and how they are related to the reporting of financial information.

Onsuccessfulcompletionofthisunitstudentswillbeinapositiontoprepare,analyse andauditfinancialstatementsinaworkplacecontextandbeabletoassistsenior colleaguesintheinterpretationofcomplexfinancialinformation.Inaddition,students willhavethefundamentalknowledgeandskillstoprogressontoahigherlevelof study.


Learning Outcomes

By the end of this unit a student will be able to:

  1. Analysethecontextandpurposeoffinancialreporting.
  2. Interpret financialstatements.
  3. Evaluatefinancialreportingstandardsandtheoreticalmodelsandconcepts.
  4. >Evaluateinternationaldifferencesinfinancialreporting.


Essential Content


LO1 Analyse the context and purpose of financial reporting


Context of financial reporting:

Complying with regulatory frameworks.

The governance of financial reporting including duties and responsibilities of responsible officers.

Unincorporated or incorporated organisations.


Purpose of financial reporting:

Meeting user expectations and legislation.

Ensuring all organisations comply with the same rules and standards. Seeking funding/investment.

Predicting future financial positions and cash flow.


LO2 Interpret financial statements


Importance and purpose of analysing financial statements:



Ratio analysis:

Thesewouldinclude,butnotlimitedto,theuseofliquidityratios,ROI,WACCand debtorperiodstodeterminefinancialpositions.


Cash flow, profit and loss and balance sheets:

Consideringhowtousecashflowstatementstomonitorinflowsandoutflowsof cash.

Usingtheprofitandlossaccounttosummarisethefinancialperformanceofan organisationinagiventimeperiod.

Using a balance sheet as a snapshot of an organisation’s position regarding assets and liabilities.


LO3 Evaluate financial reporting standards and theoretical models and concepts


Financial reporting standards:

As a common global language.

Howdoesitfacilitateunderstandingoffinancialmattersacrossinternational boundaries?

Differences between International Accounting Standards (IAS) and the International Financial Reporting Standards (IFRS).


Role and use of IFRS:

Benefits to organisations, governments, investors and other key stakeholders.

ConsiderthenationswhichadopttheIFRSandhowthisisadvantageousand/or disadvantageous.


Theories, models and concepts:

Equity theory.

Legitimacy theory.

Models of reporting and models for auditing.


LO4 Evaluate international differences in financial reporting


International differences:


The international differences before the IFRS and how countries have responded to the IFRS.

International differences in external financial reporting and factors that influence differences.


Learning Outcomes and Assessment Criteria





LO1Analysethecontextandpurposeoffinancial reporting



D1 Critically analyse the different regulatory frameworks and governance of financial reporting for specific stakeholders.

P1Analysethecontextof financial reporting including regulatory frameworks and governance of financial reporting.

P2Analysethepurposeof financial reporting for meeting organisational objectives, development andgrowth.

M1Appraisethecontext andpurposeoffinancial reporting in meeting stakeholder needs and expectations.

LO2 Interpret financialstatements


D2 Using appropriate theories and models suggest how organisations can effectively respond to existing and potential financial problems.

P3 Interpret profit and loss, cash flow and balance statements

P4 Calculate and present financial ratios for organisational performance and investment.

M2 Interpret results of financial ratios of performance and financial status, and investor ratios for users of financial statements to inform decision-making.





LO3 Evaluate financial reporting standards and theoretical models and concepts


P5Explainthebenefitsof International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS).

P6Evaluatethemodelsof financial reporting and auditing.

M3 Critically evaluate financial reporting and auditing through the coherent application of theoriesandmodelsto supportjudgementsand conclusions.

LO3 and LO4

D3Criticallyevaluatethe application of IFRS in application to specific countries anddifferences in financial reporting based on models and theories.

LO4 Evaluate international differences in financial reporting


P7 Evaluate the differences and importance of financial reporting across different countries.

M4 Critically evaluate the factors that influence international differences in financial reporting.




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