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Presented by:
Aliganga, Jason
Logical financial decisions to be made by investors or creditors are very vital since
huge, scarce and the risk of loss of hard-earned money is involved. Financial statements
are relevant to provide reliable information to investors and creditors so that they can
from financial statements that will influence their decisions. This paper is mainly grounded
information about a certain entity that is useful to existing and potential investors or
The International Accounting Standards Board (IASB) recognizes that entities can find it
challenging to provide that information. According to Hans Hoogervorst (2017), the board
has identified three concerns about the information in financial statements. However, in
their case study in which this paper is heavily anchored on, they focused more on the
particularly large institutional investors are more likely to prefer interpersonal dialogic
is perceived as giving them an advantage over transparent mass communication over the
internet. Their study is one of the literary pieces and studies that became the backbone
of this research to make sure that the outcome of this paper is credible and substantial
with enough proof to back it as evidence. The researchers studied and analyzed each
component, elements, and barriers to communication that will possibly affect the process
symmetrical process between the source and the receiver. In this model, the accountants
and the investors and creditors participate in taking turns of sending and receiving an
accounting context. Like any other model of communication, in this type of context, it
primarily begins with the Accountant (Source) who transmits or conveys information that
is financial in nature to the Investors and Creditors (Receiver). After the source has
encoded the Financial Information (Message) with the help of Financial Statements or
Reports (Channel), the receiver will now decode the message from the sender.
source and the receiver, this includes a feedback loop. This model illustrates how
potential investors and creditors of the company being the primary receivers of the
message examine the financial information being sent to them. After analyzing the
financial status and economic health of the company, the potential investors and creditors
will develop possible actions that is coherent to the given information thus it will have a
great impact and influence on their decision making. This message from the receiver is
what we call now as Economic Decision (Feedback). When the message is processed
and understood, the receiver will transmit a response or verification. In this part, the
primary users whose general purpose financial reports are directed to will make economic
decisions about providing resources to the entity in which the effectivity of communication
and the understanding of the receiver can now be assessed. The investors will assess
the risk and return of their investment in the entity and take investment decisions based
on its analysis. The creditors will determine if the business represents a sound credit risk,
as well as its ability to repay the debt as agreed. The message travels back and forth and
Looking at the totality of the communication process, the inspiration of its creation
are both Berlo’s and Schramm’s Model of Communication. This is proven true in a way
that the FS Presentation Model of Communication highlights the ideas that both the
sender and receiver should have knowledge on the elements of financial statements
which is also the gist of Berlo’s Model of Communication and that both the sender and
receiver take turns playing the role of the encoder and the decoder which Schramm’s
Model of Communication implies. In order to make the communication more effective, the
The model adopted the notion of field and experience or commonality. For the financial
statements to be easily understood by the investors and creditors, the accountants would
transmit financial reports that are easy to understand. The financial statements possess
and direct descriptions without omitting useful information, better organized to help users
enhanced comparability across reporting periods. Therefore, the encoded information will
The FS Presentation model also identifies barriers that hinder or interfere with the
relationship between the investors and the accountant simply by using complicated, deep,
and unfamiliar terms. Interpersonal Barriers are the inability to make connections with
others that can prohibit the accountant from actual communication with the investors and
creditors. Communication must be a two-way street with both parties being open and
being ready to listen to one another. Perceptual barriers are the mental blocks that
sometimes the primary users create because of the perceptions that they have of certain
situations or events in the entity. The medium of communication barriers means that in
reporting financial statements it must be short and direct to understand clearly the
message.
Source/Sender (Accountants)
They are the source of information who provide qualitative and quantitative
data to the receiver. Accountants are tasked to prepare the Financial Statements
in a concise and brief manner that is easily understood by the investors or lenders.
He/she must be knowledgeable enough than the receiver because he/she is the
one who will guide the creditors or potential investors in understanding the
information.
information shows the health and status of the company and it is used to make
economic decisions by the potential investors and creditors. It will help the primary
users to decide and choose necessary actions that is according to the given
message.
a channel to communicate the financial health and status of the company to its
potential investors and creditors. The IFRS Conceptual Framework suggests
Entity-Specific
Better Organized
Better Linked
Better Formatted
Free of Duplication
Enhance Comparability
company on how he/she analyzed the financial statements that would help him/her
A person who interprets the given message and he/she will give a feedback
investors & creditors will analyze and understand the financial statements received
his/her job to answer further questions from the investors & creditors and clarify
the terms that it can be easily understood by them especially the jargons used in
his/her field.
CONCLUSION
problem that exists between the accountants and the users of information by presenting
how information is transmitted from the source to the receiver. The source is the
accountants who present the financial reports to the users of information such as existing
and potential investors, lenders and creditors. In presenting the financial reports, it is the
responsibility of the accountants to make the financial reports simple and direct to be
understood by the users of information. Words that are unique in the accounting field or
Model shows that communication is circular where it required two participants taking turns
in sending and receiving a message. Through the financial reports presented by the
accountants, the users of information can then make economic decisions whether to
provide resources to the entity. This will then make the users of information as the source
Upon transmitting the message, there are communication barriers that hinder the
users of information and vice versa, both parties must avoid the interferences that exist
to exchange information effectively. They must possess the effective and efficient skill of
communication will take place, the goal of both parties in transmitting financial information
will be achieved.
BIBLIOGRAPHY
https://www.tandfonline.com/doi/full/10.1080/00014788.2018.1470143 [Accessed
11 Jan. 2020]
https://study.com/academy/lesson/osgood-schramm-model-of-communication
/media/project/disclosure-initative/better-communication-making-disclosures
at: https://www.reference.com/business-finance/perceptual-barriers
Ritter, A. (2012). What is this interpersonal barrier? [online] Quora.com . Available at:
2020]