User:Pardhasaradhi Madasu/sandbox

In today's world investment into 'Equities' is becoming the most common preference for creating personal wealth. Choosing appropriate business firm for investment is the critical aspect of investment in securities. The investment decision relating to equities or similar financial products depend upon analyzing the relevant 'Information'. The information about the listed entities could be gathered from the 'Disclosures' made by the business firms. The disclosures could be in the form of 'Quantitative' or 'Qualitative' data. The financial statements are the 'Quantitative' component and the 'Narratives' accompanying the financial statements are the 'Qualitative' part of the disclosures. The listed firms (or for that matter any business firm) using public money is expected to disclose the relevant information to the stakeholders in more 'Transparent' and 'Timely' manner. The usefulness of the information supplied by the business firms (especially the listed entities) largely depend upon the 'Quality' of the financial reporting.

After the global financial crisis (2008), the topic of 'Quality' in financial reporting has been considered as the most discussed and debated topic. Both the capital market regulators as well as the business leaders have focused on how to assess and measure the 'Quality' of financial reporting. The need for focusing more on the quality issues of the financial reporting comes from the simple fact that more and more 'Qualitative' issues such as corporate governance practices, environmental issues or business sustainability issues are being reporting by the business firms. Along with the hard data contained in the financial statements, the corporations/companies started giving away qualitative data. The narrative component (Story telling) part of the financial reporting has also increased. Along side the increasing in the qualitative content of the financial reporting, the frequency of reporting by listed business firms has also increased

The rapid changes that are occurring in the sphere of financial reporting has brought to light the need and importance of 'Research' with respect to the quality of financial reporting. Financial reporting must meet many criteria to be considered high quality because it is the quality of information that determines the viability of future strategic decisions. It was found that the quality of the reporting of financial information is evaluated using a system of indicators that are qualified by the Financial reporting framework as the qualitative characteristics of useful financial information and National Accounting Statement (standard) 1 as the qualitative characteristics of financial reporting.

International Accounting Standards Board (IASB) has stated that "Providing high quality financial reporting information is important because it will positively influence capital providers and other stakeholders in making investment, credit, and similar resource allocation decisions enhancing overall market efficiency". Similar to IASB, Financial Accounting Standards Board (FASB) also stress the importance of 'Quality' in financial reporting. Almost all the capital market regulators and the standard setting bodies are stressing the need and importance of having a high quality financial reporting mechanism. The only constraint of promoting the 'Quality' issue in the reporting of financial data is the 'Measurement' of quality. Although both the FASB and IASB stress the importance of high-quality financial reports, one of the key problems found in prior literature is how to operationalize and measure this quality. Because of its context-specificity, an empirical assessment of financial reporting quality inevitably includes preferences among a myriad of constituents .

In the above stated backdrop, the global accounting standards setting boards have come out with a broad framework of assessing the 'Quality' in financial reporting. These qualitative characteristics of financial statements could be referred as : a) Understandability, b) Relevance, c) Reliability and d) Comparability.