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Reporting of financial performance

In: UK Gaap

Author

Listed:
  • Mike Davies

    (Ernst & Young)

  • Ron Paterson

    (Ernst & Young)

  • Allister Wilson

    (Ernst & Young)

Abstract

Chapter 2 discusses the concept of income and outlines the emphasis placed on the transactions approach to income measurement in the development of historical cost accounting theory. In summary, financial accounting under the historical cost system essentially involves allocating the effects of transactions between reporting periods, with the result that the balance sheet consists of the residuals of the income measurement process. Despite the conflict between the asset and liability vs. the revenue and expense viewpoints discussed in Chapter 2, the importance attributed to income measurement is highlighted by the FASB’s Concepts Statement No. 1, which states that ‘the primary focus of financial reporting is information about an enterprise’s performance provided by measures of earnings and its components. Investors, creditors, and others who are concerned with assessing the prospects for enterprise net cash inflows are especially interested in that information’.1 In addition, the emphasis that analysts place on companies’ reported earnings as a measurement of performance further illustrates the importance of income measurement (see Chapter 20 at 1 for a fuller discussion of this aspect).

Suggested Citation

  • Mike Davies & Ron Paterson & Allister Wilson, 1992. "Reporting of financial performance," Palgrave Macmillan Books, in: UK Gaap, edition 0, chapter 0, pages 1067-1121, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-12998-0_19
    DOI: 10.1007/978-1-349-12998-0_19
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