INTERIM FINANCIAL REPORTING AND INVESTMNET DECISIONS Essays

INTERIM FINANCIAL REPORTING AND INVESTMNET DECISIONS BY A.A. OWOJORI, PhD, FCA Senior Lecturer in Accounting & Business Education Accounting and Business Education Unit Department of Educational Management Faculty of Education Ekiti State University Ado-Ekiti, Ekiti State, Nigeria [emailprotected] [emailprotected] 08033525195 ABSTRACT The main objective of financial report, annual or interim, is to provide information about the reporting entity?s financial performance and financial position that is useful to a wide range of user for assessing the stewardship of management and for making economic decisions. Investment decision is function of information present in financial report. The only means by which the investors and other parties having interest in the coy con know the financial position of a company is through financial reporting which is prepared at the and of the accounting period. At this stage, arbitrage may occur depending on the information gathered from the financial report. To wait or retain ones capital in some companies for a year could be disastrous. This is the reason why most investors prefer interim financial reporting, which keeps the investors informed about the financial progress the company is making with their capital. Quick decision can be made before it is too late. This study delves into the development of financial reporting at international level as well as various r egulations of financial reporting. The paper went further to compare the result of UAC Nigeria Plc and that of University Press Plc?s statement with that which was reported at the end of the year. Finally, the paper identified the limitation to the use of interim financial statement. Keywords: Interim, Financial Reporting, Investment Decision Introduction It is necessary to revise forecast in other to incorporate current business conditions. According to John I. W. et al (2003) interim [less than one year] financial statements are a valuable source of information for monitoring performance. Interim statements are usually issued quarterly and are designed to meet user?s needs. They are useful in revising estimates of earning power and earning forecasts. Yet we must recognized certain limitations in certain reporting related to difficulties in assigning earnings components to period of under one year in length. Timely and accurate financial report is the main stay of investment decision. IAS 34 describes financial report as being annual and interim. The standard define interim period and interim financial report as follows: Interim period is a financial reporting period shorter than a full financial year and interim financial report as a financial report containing either a complete set of financial statement or a set of condensed financial statement for an interim period. The subject of financial reporting objectives has been generally recognized as very important in accounting area since a long time. Many accounting bodies and professional institutes all over the world have made attempts to define the objectives of financial statement and financial reporting which are vital to the development of financial accounting theory and practice. (Jawahar Lal, 2003 P 19) this section describes developments in this area at the international level, particularly USA and UK. It can be rightly said that most of the attempt in this area of financial reporting objectives has been made in USA and UK and accounting development in these countries have great impact on accounting developments and practice in other countries of the world. The Accounting Principles Board (APB) statement No 4 1970 was the first publication which formulated the objective of financial reporting. Trueblood Report (1973) gives the following objective of financial report. 1.An objective of financial statement is to provide information useful to investors and creditors for predicting, comparing and evaluating potential cash flows to them in terms of amount, timing and related uncertainty. 2.An objective of financial reporting is to provide a statement of financial position useful for predicting, comparing and evaluating an enterprise earning power. This statement should provide information concerning enterprise transactions and other events that are part of incomplete earning cycles. Current value should also be reported when they differ significantly form historical costs. Asset and liabilities should be grouped or segregated by the relative uncertainty of the amount and timing of prospective realization of liquidation. The Corporate Report (UK) 1976 alludes to the above by adding that, the report assigned responsibility for reporting to the economic entity. Having an impact on the society through its activities. These economic entities