Question

what are the guidelines that corporations have to follow for financial reporting?

Answer 1

For the Completeness of the Financial Reporting GAAP has set some guidelines to be followed by every company.

Company should disclosed it Cash Flow Details, Profit from the company operations and overall financial position.

So these three statement are mandatory to present -

Cash flow statement

Income Statement

Balance Sheet.

Also required to state the change of the equity and if there is any change in the accounting policies followed by the organisation which can be stated in the notes to accounts.

Other Guidelines is provided to the specific item for accounting and Valuation.

1) Inventory - Has to be valued at Cost or Net Realisable Value which ever is lower. Realisable value is noting but the present selling price of the assets in the market.

2) Receivable and Payable - Receivable and Payable Initially recorded at Fair Value and latter it is adjusted to the net receivable amount and payable amount as per market situation, means if any impairment and bad debts is estimated then that need to be accounted in the final value of receivable and Payable.

3) Revenue - Revenue is measured at fair value of its consideration. Revenue for sale of goods cannot be recognised until the company had transferred the risk and reward to the buyer. Revenue for services is accounted on the basis of stage of completion ot services which are measured.

Leasing (Accounting as per leasee) - Guidelines has been given for leasing ad there are two type of lease ~ Finance Lease and Operating Lease. Finance Lease are those in which risk and reward transferred to leasee and the assets is recorded as an assets in the balance sheet of leasee and accordingly payable is created.

Operating lease - Operating lease are the lease other than finance lease and in which expense is booked in the books of leasee as and till when the assets is used.