Financial Reporting Framework
A financial reporting framework refers to a set of rules, standards, and guidelines that dictate how financial information should be prepared and presented in a company’s financial statements. This framework provides a common language for communicating financial information to stakeholders, including investors, creditors, and regulators.
The purpose of a financial reporting framework is to ensure that financial statements are accurate, reliable, and relevant to users. It establishes the principles and practices that companies must follow when preparing their financial statements, including the methods for recording transactions, the format for presenting financial information, and the disclosures required.
Examples of financial reporting frameworks include the Generally Accepted Accounting Principles (GAAP) in the United States, the International Financial Reporting Standards (IFRS) used in many countries around the world, and the Accounting Standards for Private Enterprises (ASPE) in Canada.
It’s important to note that companies must comply with the financial reporting framework that is applicable to their jurisdiction and industry. Failure to do so can result in legal and financial consequences.