What Kind of Information About a Business Needs to Be Provided in the Financial Statements

In preparing the financial statement, the enterprises need to provide more qualitative characteristics in the financial statement to meet the needs of the users. Under the IASB conceptual frameworks, a measurement tool is prepared for ensuring the financial information of financial reporting to ensure that has quality that is suitable to the users in decision making. The measurement tool reflects all the element of qualitative characteristics because these characteristics determine the decision usefulness of financial reporting information (IASB, 2008) that is understandability, relevance, reliability, and comparability.

Understandability for example, is mentioned to the quality of information provided to the users to enable them to understand their significance (IASB, 2008). It means that the information of financial statement prepared by the company must be presented in a clear and easy way to understand. As some of the users or the analyst need to use a short period of time to make a decision. Thus, the company can provide narrative explanations (Iu & Clowes, 2004) and to provide tabular and the format of graphic to improve this characteristic by descriptive relationships and ensuring succinctness (Jonas & Blanchet, 2000)

Secondly, under conceptual framework, accounting information is relevant if it has the capacity to make a difference in a decision making process. (John Louie Ramos – Helium) It can help the users to forecast different outcome of decision, through helping users either to predict the value or to correct prior expectation through the feedback. According the Francis, Many researchers have operationalized predictive value as the ability of past earnings to predict future earnings. (e.g. Francis et al., 2004) Besides that, Jonas and Blanchet (2000) argue that the information in the annual financial report offers the feedback about past transactions to the users, this will benefit them to adjust or confirm their expectations.

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