Financial reporting is accounting and it does affect the economy

Financial reporting is accounting and it does affect the economy

 

Every accounting entry eventually is part of the financial reports for the financial period. To prepare the financial reports in terms of IFRS or US GAAP or whatever standard at the end of the financial period, an entity´s economic activities are accounted from the first till the last day of the financial period. That all ends up finally in the financial report. The measurement bases used during the reporting period do affect the economy. In principle, it all boils down to whether you implement the stable measuring unit assumption or not.

 

To be able to prepare the financial reports at the year-end you have to do the whole financial year’s accounting: from the beginning to the end. So, all of accounting is part of financial reporting. It is impossible to do the financial reports without accounting.

 

David Mosso stated that accounting is a measurement instrument. He could just as well have stated financial reporting is a measurement instrument. Financial reporting includes accounting: all accounting entries during the financial year and the financial reports at the end of the financial period.

 

So, financial reporting does affect the economy.

 

 

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Nicolaas Smith
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