Financial Statement Transparency
Transparency in financial statement means the statement should be users friendly and clear, everything should properly be disclosed and that should be easily understandable. The use of hidden entries and the hi-fi accounting and financial terms should not be used and each side should properly be elaborated. The main objective while preparing the transparent financial statement is that it should be interesting and easily understandable. Financial statement has got highest importance for any sort of business. In fact you can say the financial statement is the summary of the whole year’s performance.
High levels of auditing and cross checking are done after making the financial statement with the aim to make it error and fraud free. Other than making the financial statement with proper elaborations and making it reader friendly, one thing you have to insure that each figures are truly recorded and every entry should be there in making the financial statement transparent.
Your financial statements should give the positive impact to its readers, impact in regard to there should be entries which are honestly recorded and clear things should be mentioned. While making the Financial statement transparent, you also have to insure whether the GAAP is followed or not. GAAP makes your financial statement easily understandable internationally.
Companies, who know the significance of making their financial statement transparent, would also know the psychology of the persons who are known as the investors. A financial statement is prepared in the transparent way as it’s a source which will attract the investor and on the contrary desire spawn among them for making an investment in that company. An opaque of the financial statement with the complex figures and terms makes the investors in a complex situation. They cannot then calculate the risk factor or the profitability ratio if the financial statement is not transparent.