Question A
The main objective of financial reporting is to avail useful information to the users of financial statements in making sound decisions. It involves both financial statements and other means of communicating information that relates directly or indirectly to the accounting system information such as insight about the resources, obligations, and incomes. Financial reporting that is shorter than a fiscal year is interim reporting. It can be semi-annually, quarterly or sometimes monthly reporting; thus, providing users of such information with current details for assessing business performance ( Alsharairi et al., 2015) . The interim statement, according to the GAAP and IFRS should entail condensed statements of the financial position of the company. Typically, the information contains condensed but comprehensive income statement, condensed statement of cash flow, condensed income, condensed statement of changes in equity and selected explanatory notes
Question B
Just like any other requirement, interim reporting is under the regulation of the Generally Accepted Accounting Principles and the International Financial Reporting Standards. Therefore, clients considering structuring their firms as corporations have the following issues to consider in the preparation of interim financial reports.
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| GENERAL ACCEPTED ACCOUNTING PRINCIPLES. | INTERNATIONAL FINANCIAL REPORTING STANDARDS. | |
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1 |
Interim financial statements are required under the generally Accepted Accounting Principles. | IFRS does not require the preparation of interim financial statements. The presentation of financial statements requires that. |
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The financial statements should be compliant with the GAAP requirements. It is compliant with the materiality principle, consistency, regularity, principle of continuity, principle of prudence, etc. | Financial statements prepared should be compliant with the IFRS requirements. The entity should present assets of complete financial statements. For the purpose of presentation, the report should be fair and in compliance with the IFR ( Lubbe, Modack, & Watson, 2014 ). They should be going concern, the accrual basis of accounting, materiality, and aggregation offset. |
| it is permitted to prepare condensed and summarised financial statements | They are permitted to prepare condensed and summarized interim financial statements. The organization either can choose to prepare in the form of complete financial statements or condensed financial statements | |
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3 |
Accounting policies used in the preparation of interim financial statements should be similar to those used in the preparation of annual financial statements. The purpose of the similarity is to ensure consistency in the statements that will fasten and eases the decision-making process. | Preparer of the financial statements is required to present statement similar to their annual statements. The latter is important since the users of such information will not be served well with the summarized financial statements that might not allow full analysis of the entity's financial condition. Also items in annual reports are highly aggregated; hence their omission would be misleading |
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4 |
Any changes or alterations of the accounting policies and principles should be reported. The changes may be informed of accounting estimates such as incomes and expenses. | Disclosure is another requirement. Companies’ especially public held firms must include disclosure in their reports. They should disclose information such as footnotes and other explanations pertaining financial statements that might not be clear in the financial statements. The requirement is important that it enhances transparency ( Al-Tahat, 2010). ). Even though interim reporting needs to be transparent, it does not require the full disclosure as the annual financial statements. Consequently, they should provide material explanatory notes and disclosures in the recent annual reports are not included. |
2. Example of the statement is indicated on the excel file
3. The reporting requirements for in interim financial reporting under GAAP and IFRS are similar. For example, both require the interim statements to be similar to the annual financial statements of the corporation. Also, disclosure is vital in both standard since all changes need to be included in the financial statement.
Question C
Geographical Segmentation Process
Geographical segmentation is a process of segmentation that involves the division of target users of reports based on their location in order to better the delivery of financial information. The process is good since it ensures that the users get the right and relevant information based on their location (Wedel & Kamakura, 2012). The process ensures that the preparers of information are aware of each segment's information requirement. Finally, this process ensures transparency of the financial statements. The process determines and identifies segments to be reported separately through consolidation of the financial statements as required by IAS14; if segments are reportable, it must be separately revealed. For example, if a company has retail shops in USA and Canada and sell product to different consumers, the entity may decide to report each separately.
2. The objective of segmentation is to ensure transparency in the reporting process. Geographical segmentation enhances transparency by ensuring that users of financial statements are availed with relevant information.
3. Enriching reports qualifying one’s audience by ensuring the segments are with a minimum of reliable data. Therefore the reports must be continuously updated to be relevant. Also, integration of the Omnichannel approach into one’s strategy to reduce customer-tracking complexity is vital. Also, the most accessible channel should be used to ensure even distribution of the information on the reports. To enhance transparency, the users of information must have equal access to the reports. Furthermore, personalization and real-time segmentation and prioritization of segments according to value also improve the process of segmentation.
References
Alsharairi, M., Al-Hamadeen, R., Issa, F., & Kakish, O. (2015). Interim financial reporting and compliance with IAS 34: the case of the Jordanian financial sector. Alsharairi, M., Al-Hamadeen, R., Issa, F. and Kakish, O.(2015)“Interim Financial Reporting and Compliance with IAS , 34 , 100-109.
Al-Tahat, S. S. Y. (2010). The Timeliness and Extent of Disclosure of Corporate Interim Financial Reporting in Jordan (Doctoral dissertation, Universiti Utara Malaysia).
Becker, B. (2007). Geographical segmentation of US capital markets. Journal of Financial Economics , 85 (1), 151-178.
Lubbe, I., Modack, G., & Watson, A. (2014). Financial accounting GAAP principles. OUP Catalogue .
Muhamad, R., Melewar, T. C., & Faridah Syed Alwi, S. (2012). Segmentation and brand positioning for Islamic financial services. European Journal of Marketing , 46 (7/8), 900-921.
Wedel, M., & Kamakura, W. A. (2012). Market segmentation: Conceptual and methodological foundations (Vol. 8). Springer Science & Business Media.
