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Before we get into the needs of regulations in financial reporting first we have to know What is financial reporting Who uses these reports What are the regulatory bodies involved in the regulation of these reports And finally How this system of regulations and standards works Financial reports allow the organization to communicate information about their performance to the outside world So financial reports provide summarized information about an organizations transactions for external decision makers eg Investors Financial reports can be used by employees and trade unions government creditors and lenders customers shareholders and investment analysts All these users may need different statements of financial accounts but the most important statements which they need is the balance sheet profit and loss account cash flow account and the income statement The two main regulatory bodies of financial reporting are the Law and the Accounting Profession with the Accounting Standards Board usually known as ASB In UK most of the legislation related to the publishing of accounts is embodied in the Companies Act 1985 and 1989 which are concerned with the accounts of the limited liability companies only The Companies Act 1989 is the main frame which the companies and accountants have to follow All the financial statement drawn up under the act 1989 must present a true and fair view and its function is to protect all the users of the financial reports and statements The second and the most important regulatory body is the accounting profession The standard setters should be aware of the information needed by all users of financial reports and should know the impact and the outcome of a different accounting method on the needs of those users The standard setters should also be able to resolve the conflicts which exist between the needs of different users So they have to find an alternative way which best satisfy user needs and this
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