Primary qualitative characteristics

Introduction:

The performance of any company depends after its financial claims. These financial claims are helpful tools in decision making for various viewers e. g traders, suppliers, government firms, customers, and management. The primary characteristics of the statements should be easy to understand. So, all the stakeholders use these financial assertions according with their own desire. The underline process for the financial claims is to fulfil the necessity of accounting benchmarks, rules and conventions. With the help these key qualitative characteristics, financial claims show the current, correct, true and reasonable view of the business enterprise.

In section A brief description is given on the listed company. Need for financial claims have been discusses. There's a brief dialogue on the financial record of Unilever with regards to the principal qualitative characteristics as given in ASB's Statement of Principle.

In section B analysis is performed on the down sides in preparing a set of useful financial claims which exhibit every one of the principal qualitative characteristics discussed earlier. Then some focuses on the successes by the Unilever is being discussed.

The helping material used to compile this article is extracted from websites, course catalogs and by Accounting Expectations Board December 1999 Statement. It turned out tried out to cover all the relevant point for the given questions.

Section A:

Defining Posted Company:

There are two types of companies open public and private. In case there is general population limited company, shares may be wanted to everyone but private limited company cannot achieve this task. The company which includes been documented in the stock market is often known as detailed company.

In UK majority of the firms are being handled by means of limited companies. Now a day's more than 2 million limited companies are prevailing in the current scenario. These businesses are contributing in the economy and occupations (Atrill, P. & McLaney, E. , 2008, p. 112)

Financial assertions:

"At regular period open public companies must put together documents called financial claims. Financial statements show the financial performance of the company. They are used for both inside-, and external purposes. " http://hubpages. com/hub/The-Importance-of-financial-statements

There are four types of financial claims trading, earnings and loss profile, balance sheet, declaration of owner's collateral and cashflow statements. Trading revenue and loss bank account deals in way of life, revenue and bills for a particular time frame. Balance sheet shows budget of the business enterprise. In declaration of owner's equity we concentrate on starting capital, drawings, and ending capital of the owners. Cash flow statements deal in all types of in-flows and out-flow of cash in business.

Financial claims of Unilever Company are considered for the debate. It really is one of the world's leading suppliers of consumer goods. Their try to add values alive through meeting day-to-day consumer needs, helping people to feel good, look good and find out about the life span. Unilever is working globally and their business achieves near 50 % of its turnover in expanding and emerging markets.

Primary qualitative characteristics in ASB's claims of principles in relation to this content and display of Unilever's financial statements.

Relevance, dependability, comparability, understandability and materiality are the basic major qualitative characteristics of the financial claims. These assertions should be clear and understandable to all stakeholders. Previously listed characteristics are being examined in the financial claims of Unilever.

Relevance:

Financial claims should provide relevant information to the best readers so measureable action can be taken. If the factors are not relevance then it is unproductive for mentioning in the affirmation. Predictive and confirmatory worth depend after relevant information which is provided by the business. The capability to influence the monetary decisions and impact the users will depend after relevant information. But these have to provide timely.

In Unilever's financial record, relevance information regarding the share of world wide web earnings/loss of joint ventures is helping to make the future decisions. Areas where they operate and number of people hired supply the information to an individual of the financial statement who she is doing socially. Research of financial statements according to physical segment increases the relevancy to user to investigate the real financial status of the company. The percentages of the segment liabilities to the total liabilities gave an obvious picture of risk from the company.

Reliability:

Financial statements should have information which is totally reliable. This means that information have to be faithfully displayed, neutrality and should be complete and clear of material errors. All of the transaction should be faithfully represented in the financial statement as these were measured, accepted, and offered in those claims corresponds meticulously to the result of that purchase. It also requires all the id and obligation arising from the transaction focusing to those that likely to have commercial result used.

As far as errors are concern, financial assertions are worthless if having mistakes and imperfect information. This may result in phony and deceptive.

In Unilever's financial statement auditor unqualified thoughts and opinions gave the sensible reliability to the financial record. Changes on the foundation to segmentation and changes consequently to the last year comparative figure gave the reliability to compare the performance of the company. Further classification on the basis of product provided more consistency. Then consolidated affirmation of changes in collateral offered the clear view of changes in equity in three 12 months. Pension fund disclosure shows the dedication company has towards his worker.

Comparability:

Information in the financial record will be useful if it can be comparable with the similar information explained in the previous period. This can help in figuring out the financial performance and position. Moreover, this will also help the users to make proper compressions and measure the differences, influence on ventures, finding similarities and other occasions occurring time to time. Uniformity of entries can be handy to have an efficient comparison. There has been a uniformity in looking at throughout when reporting in each accounting period from next period. If accounting guidelines that are followed to make the entries gets altered then it'll affect the usefulness of financial assertions.

Financial assertion of Unilever shows changes in the foundation to segmentation and changes accordingly to the last year comparative figure gave the consistency to compare the performance of the company. Secondly, consolidated cash flow allowed the user to evaluate the quality of the financial record. Thirdly, segmentation based on physical and product has enabled users to compare performance of company for different products. Furthermore, computation of basic and diluted income per share given in the income affirmation gives a clear indicator of company future potential shareholders and syndication of dividends.

Understandability:

It is very essential to have understandable information in the financial record. It will fulfil the needs of the users. It needs to be in a meaningful way so that orders and other incidents will help the users to understand the performance. Information should be well provided keeping in mind the users knowledge for business and economics activities.

Unilever's report suggests the ratio of shares in the subsidiaries and its effect on financial record give understanding regarding earnings accepted. Company disclosure of investment in financial market and the impact in the recession on this investment provided the understanding o f coverage company ingest this kind of investments. Income in this financial turmoil supply the understandability that the business profits are downturn evidence and company is operating in the need product industry.

Materiality:

All these discussions identify the characteristics of experiencing a useful financial statement. Materiality can identify what information a specific set must have. This will lead to making the quality of the financial statements. When there is immaterial information then it'll have an impact on other information and disturb the users to make decisions. So these should be excluded.

Unilever's disclosure on immaterial items like trade payable and material items like impairment provides information to make better economical decision. Classification of the eye in cashflow assertion either as operating or funding makes material impact on the results. Accounting estimation changes the results of financial statements significantly, so disclosure of accounting estimate and the basis to working of the estimation gave the info that financial statements are materially reasonable.

Section B:

Difficulties in preparing a set of useful financial assertions, which exhibit every one of the main qualitative characteristics diagnosed.

In preparing a useful financial statement you will see some difficulties which occur due a conflict between your principal qualitative characteristics. These conflicts can make the report meaningless and the main aim of the financial record cannot be achieved. In this particular situations a trade-off need is to discovered that exactly what will be better towards the company and meet up with the require goal of the financial statements. In some situations timeliness of information also creates difficulty in handling. Companies operating globally not able to have the financial information on time from across the world or information established got change because of the users need. Information related to sales and profit contribution not properly managed will create difficulty. Following is the diagnosis for struggling in preparing a useful financial record.

Relevance and Dependability:

In some periods conflict occur because of the information that is a lot relevant however, not reliable and information which is reliable but will not seem to be relevant. Selecting the amount to measure the asset or liability sometime creates conflict. The best thing at this stage is to use the most appropriate information which may be relevant or reliable. Timeliness of information can create a problem. Which means that providing the info late which is considered ass outdated. You will see uncertainty and have an effect on the stability of the trades. Furthermore, if the info is overlooked from the financial record due to dependability then you will see no completeness. All of the financial information should be made promptly to avoid these complications remember that need for dependability. Reliable information is important to provide so to help make the users understandable.

Neutrality and Prudence:

Problems can be seen in both of these aspects of reliability. This occurs when there may be uncertainty, gain and belongings aren't overstated and liabilities aren't understated. You will see judgements and exercises to defeat the uncertainty. There could be issues in getting the accurate transaction that require to be measured.

Understandability:

Conflicts will happen when the information is not understandable to the users. But it is not necessary that financial information which is relevant, reliable and comparable should be excluded from the financial claims. This will influence the main objectives of the article. Some users might face difficulty in understanding the financial claims but will have full record you can use in future to identify the performance and the position. Conflicts can be sorted out by providing guide lines for learning the financial assertions. Company had to manage their financial claims for interior as well for exterior users. So excluding the major details from the record will lead to uncertainty and there will be material error also.

Achievements of Unilever:

Abbott Laboratories is an extremely old and successful company. It includes looked after all the issues coming its way. For giving the financial article of the company, accountants have taken care of all the requirements as relevance, consistency, comparability, understandability and materiality. Being in No. 80 of Lot of money 500 companies there a wide range of shareholders, investors, analysts and government looking forward in investing in the business. Therefore, accountants have given relevant and reliable information. Different users are of financial claims like customers, shareholders, bankers and public. Company is expected to provide information in a manner understandable to all of them. Company should provide statistical data for top notch class and basic information i. e. future programs and director's reviews for public. Company hasn't shown risk opportunity examination as it is difficult in Pharmaceutical Company. But there may be big risk in this dynamics of business. Small faults in the merchandise can levy heavy penalty on the company and can make financial statements irrelevant for future years.

Conclusion:

It is to conclude that financial reports are the main source of identifying the financial performance and financial position of any company. The principal qualitative characteristics brought up in the ASB's Statement of Rules should be studied in view to make a financial statement. This can help the users to make suitable decisions. Unilever's financial statements have been examined with due concern of the principal qualitative characteristics. The articles and the presentation of financial claims are up to the typical of ASB's assertion of key points.

There are certain difficulties which are to be faced in different situations for setting up a set of useful financial assertions. Conflicts occur in several situation and can be solve. Unilever being one of the largest consumer goods company with specialists and skilled employees is doing excellent and their progress in recent years is clear and encouraging. They have now great brands and around 70% of these turnover comes from categories in which they have leadership positions.

  • http://www. unilever. com/investorrelations/annual_reports/annual_report_Form/?WT. LHNAV=Annual_Report_&_Accounts
  • http://www. unilever. com/images/ir-ar08-financial-statements_tcm13-163118. pdf

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