You are a financial accountant in a medium-sized media buying agency in Dublin: Business Studies Report, ICD, Ireland

Module: Financial Reporting for Business

You are a financial accountant in a medium-sized media buying agency in Dublin. Your managing director has been reading the IASB’s Framework for the Preparation and Presentation of Financial Statements (the Framework) and, as part of the qualitative characteristics of financial statements under the heading of ‘relevance’, she notes that the predictive value of information is considered important.

She is aware that financial statements are prepared historically (ie after transactions have occurred) and offers the view that the predictive value of financial statements would be enhanced if forward-looking information (like, for example, forecasts) were published rather than backward-looking historical statements.

She also notes that the Framework requires financial statements to be prepared on the basis that they comply with certain accounting concepts, underlying assumptions and (qualitative) characteristics. Five of these are:

• Matching/accruals
• Substance over form
• Prudence
• Comparability
• Materiality

Write a report to your Managing Director addressing the questions asked and explaining in terms and concepts listed in a manner that a non-accountant would understand in the context of your organization. Illustrate these concepts with reference to financial statements produced by the organization under the IFRS reporting requirements for IAS1 Presentation of Financial Statements and IAS7 Cash Flow Statements.