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Objectives of Financial Reporting

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  • R. G. Walker

Abstract

Conceptual framework documents can be evaluated in terms of four criteria: clarity of expression, consistency of assumptions with knowledge of commercial practices and the behaviour of external users of accounting information, internal consistency, and comprehensiveness as a guide to financial reporting practice. On this basis, the Australian Accounting Research Foundation's (AARF’s) Statements of Accounting Concepts No. 2 (AARF, 1990a), Objectives of General Purpose Financial Reporting, is found wanting. SAC 2 is inappropriately drafted in terms of normative statements, and incorporates considerable ambiguity because of its allusions to inconsistent objectives without guidance as to weightings or how apparently inconsistent statements might be reconciled. Supporting analysis is rudimentary at best and it relies on an inappropriate use of terminology, while statements lack empirical support and are not linked to any analysis of users’ needs for information. Six recommendations for the redrafting of a more narrowly focused SAC 2 (concentrating on annual reports by profit‐seeking entities) are presented.

Suggested Citation

  • R. G. Walker, 2003. "Objectives of Financial Reporting," Abacus, Accounting Foundation, University of Sydney, vol. 39(3), pages 340-355, October.
    • Handle: RePEc:bla:abacus:v:39:y:2003:i:3:p:340-355
    DOI: 10.1111/j.1467-6281.2003.00137.x
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    References listed on IDEAS

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    1. Frank Clarke & Russell Craig, 1991. "Juridical Perceptions of the Relevance of Accounting Data in Wage Fixation," British Journal of Industrial Relations, London School of Economics, vol. 29(3), pages 463-483, September.
    2. R. G. Walker, 2002. "Are Annual Reports of Government Agencies Really ‘General Purpose’ if They do Not Include Performance Indicators?," Australian Accounting Review, CPA Australia, vol. 12(26), pages 43-54, March.
    3. R. G. Walker & Trevor Wilkins & Ian Zimmer, 1982. "The Effect of Consolidated Statements on Loan Officers' Assessments of Ability to Repay," Australian Journal of Management, Australian School of Business, vol. 7(2), pages 179-195, December.
    4. Ross L. Watts, 1977. "Corporate Financial Statements, A Product of the Market and Political Processes," Australian Journal of Management, Australian School of Business, vol. 2(1), pages 53-75, April.
    5. Lev, B & Zarowin, P, 1999. "The boundaries of financial reporting and how to extend them," Journal of Accounting Research, Wiley Blackwell, vol. 37(2), pages 353-385.
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    1. R. G. Walker, 2009. "Public Sector Consolidated Statements—an Assessment," Abacus, Accounting Foundation, University of Sydney, vol. 45(2), pages 171-220, June.
    2. David B. Sutton & Carolyn J. Cordery & Tony Zijl, 2015. "The Purpose of Financial Reporting: The Case for Coherence in the Conceptual Framework and Standards," Abacus, Accounting Foundation, University of Sydney, vol. 51(1), pages 116-141, March.
    3. Janice A. Loftus, 2003. "The CF and Accounting Standards: The Persistence of Discrepancies," Abacus, Accounting Foundation, University of Sydney, vol. 39(3), pages 298-309, October.
    4. El-Tawy, Nevine & Tollington, Tony, 2013. "Some thoughts on the recognition of assets, notably in respect of intangible assets," Accounting forum, Elsevier, vol. 37(1), pages 67-80.
    5. Raar, Jean, 2008. "A basic user utility preference to reduce uncertainty: A dissent to reporting and asset measurement," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 19(5), pages 785-804.

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