Accounting Disclosures in Financial Reporting

The investing public\u27s primary objective is to maximize wealth and avoid risks. This goal can be achieved through the use of reliable financial reporting of which accounting disclosures are the most demanding components. The simple fact to this is the way in which basic financial statements are prepared. Income, balance sheet, and cash flows statements are composed of aggregate numbers which do not express meaningfully the information needed by all users. Also in addition to summation of statistical facts about the economic activities of the business units, the basic financial statements do not reflect many other factors which affect business operations. For instance, pending legal matters which may have a serious effect on business operations, are usually not reflected on the basic financial statements. As pointed above, such information should be conveyed to the users of financial statements in order to reduce risks in making decisions. The unrecorded liabilities and assets are therefore necessary to be reported in notes to financial disclosures. Also the accounting disclosures further explain in detail those figures which have been summarized on the basic financial statements. These two functions (the reflection of internal and external variables affecting business operations and simplification of accounting data presented in basic financial statements) of accounting disclosures have expanded the user\u27s reliability on notes to financial statements. As it will be seen later in the succeeding chapters, accounting disclosures play important roles in working out decisional tools which are used by analysts in selection of best fit portfolios or assets. The objective of this thesis is to show social responsibility attached to accounting field and how this responsibility is achieved by the use of reliable, relevant and comparable financial information in order to sustain the growth and stability of economic units