An overview of the use of corporate financial reports information disclosed in annual reports by external users in Malaysia
The primary purpose of preparing financial statements is to provide information that will be useful for a wide range of users in making business decisions. Users of corporate financial information such as shareholders, bankers, securities brokers and governments normally use annual reports t...
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| Main Authors: | , |
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| Format: | Book Section |
| Language: | English |
| Published: |
Penerbit UTM Press
2009
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| Subjects: | |
| Online Access: | http://eprints.utm.my/id/eprint/14444/1/SaudahSofian2009_AnOverviewoftheUseofCorporateFinancialReports.pdf http://eprints.utm.my/id/eprint/14444/ |
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| Summary: | The primary purpose of preparing financial statements is to provide
information that will be useful for a wide range of users in making
business decisions. Users of corporate financial information such as
shareholders, bankers, securities brokers and governments normally
use annual reports together with other sources of information to
evaluate the performance or creditworthiness of a company. A
financial statement is prepared in order to communicate economic
measurement and information about the resources and performance
of a reporting entity. According to Epstein and Freedman (1994), the
usefulness of annual reports to individual shareholders is not only on
the financial part, but they are also interested on certain aspects of
social responsibility such as product safety, quality and environment
activities.
Starting from January 2006, Malaysian companies are required
to implement all the Financial Reporting Standard (FRS) that have
been issued by the Malaysian Accounting Standard Board (MASB)
in the preparation and presentation of financial statements. The move
by MASB to adopt International FRS is a reflection of Malaysia’s
commitment to align with global accounting standards in order to converge to one common set of standards for the entire developed
world in this age of cross-border trading (PricewaterhouseCoopers,
2005). Through convergence, financial statements will become more
relevant, credible and more transparent, all of which are critical
to the effectiveness of Malaysian capital markets. Since FRS is
still new and in a transition process, it is expected to have many
problems and issues, thus this study focused on the annual reports
prepared by Malaysian listed companies to shareholders prior to FRS
implementation.
The annual report is seen by the accounting profession as an
important device for financial communication between management
and shareholders (Bartlett and Chandler, 1997). Stanton and Stanton
(2001) contended that even if users of annual reports are assumed
to be knowledgeable, the information itself could be in different
degrees of comprehensibility. Hence, the quality of understandability
is a characteristic influenced by both users and preparers of annual
reports. |
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