Вы находитесь на странице: 1из 10

The FS Presentation Model of Communication

Presented by:

Abing, Richelle Aira

Aliganga, Jason

Arcales, Shine Heaven

Deligero, Cherry Mae

Daque, Cherry Ann

Tapdasan, April Mae

MWF (3:30 PM-4:30PM)


INTRODUCTION

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

make logical investment decisions. The importance of financial information is hence

cannot be denied for its contribution to safe financial decisions.

The purpose of this study is to develop a model of communication that applies to

accounting practice. Specifically, it aims to address the communication problem between

accountants and creditors or investors in presenting and interpreting financial information

from financial statements that will influence their decisions. This paper is mainly grounded

by the objective of general-purpose financial reporting which is to provide financial

information about a certain entity that is useful to existing and potential investors or

creditors in making decisions about an investment or providing resources to the entity.

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

need to communicate financial information effectively.

In connection, Brennan and Merkl-Davies (2018) stated that shareholders

particularly large institutional investors are more likely to prefer interpersonal dialogic

communication in the form of private face-to-face, behind-closed-doors meetings, which

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

of communicating financial data.

THE COMMUNICATION MODEL

FS Presentation Model of Communication

The FS Presentation model is built on the concept of communication as a two-way

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

information. This newly created model illustrates the process of communication in

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.

Since it is a model that shows a two-way process of communication between the

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

will be confirmed when it has been received.

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

researchers presented various characteristics that financial statements should possess.

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

the principle of entity-specific that tailor information to a company's circumstances, simple

and direct descriptions without omitting useful information, better organized to help users

understand financial statements, better linked, better-formatted, free of duplication, and

enhanced comparability across reporting periods. Therefore, the encoded information will

be comprehended exactly as what it entails to the receiver.

The FS Presentation model also identifies barriers that hinder or interfere with the

effective process of communication. Communication barriers may include Language,

Interpersonal, Perceptual, and Medium of Communication. Language Barriers affect 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.

The following are the elements of FS Presentation Model:

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.

Message (Financial Information)

A relevant information that is useful to the primary users. Financial

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.

Channel (Financial Statements & Reports)

This refers to the mode of transaction in interpreting a message. Financial

statements are the product of Financial Reporting. It is used by the accountants as

a channel to communicate the financial health and status of the company to its
potential investors and creditors. The IFRS Conceptual Framework suggests

different characteristics of a financial statements which includes:

 Entity-Specific

 Simple and Direct

 Better Organized

 Better Linked

 Better Formatted

 Free of Duplication

 Enhance Comparability

Feedback (Economic Decision)

This refers to the response of potential investor and creditors of the

company on how he/she analyzed the financial statements that would help him/her

in making economic decisions.

Receiver (Investors & Creditors)

A person who interprets the given message and he/she will give a feedback

or response to the message he/she received to show mutual understanding. The

investors & creditors will analyze and understand the financial statements received

and decide on what further actions to take. In the accountant’s perspective, it is

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

In the practice of the accounting profession, communication plays a vital role in

providing quantitative information, primarily financial in nature, about economic entities,

that are intended to be useful in making economic decisions.

The FS Presentation Model of Communication aims to address the communication

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

simply know as jargon must be avoided to avoid misunderstanding. The FS Presentation

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

of the message to the accountants.

Upon transmitting the message, there are communication barriers that hinder the

accountants in effectively transmitting the message. These barriers are perceptual,

language barriers, interpersonal barriers and medium of communication.

To effectively communicate the desired information from the accountants to 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

communicating to transmit the desired information to the receiver. If proper

communication will take place, the goal of both parties in transmitting financial information

will be achieved.

BIBLIOGRAPHY

Brennan, N. and Merkl-Davies, D. (2020). Do firms effectively communicate with financial

stakeholders? A conceptual model of corporate communication in a capital market

context. [online] Taylor & Francis. Available at:

https://www.tandfonline.com/doi/full/10.1080/00014788.2018.1470143 [Accessed

11 Jan. 2020]

Hendricks, B. (2020). Osgood-Schramm Model of Communication: Definition &

Application. [online] Study.com. Available at:

https://study.com/academy/lesson/osgood-schramm-model-of-communication

definition-application.html [Accessed 11 Jan. 2020]

Hoogervorst, H. (2020). Better Communication in Financial Reporting Making disclosures

more meaningfu. [online] Ifrs.org. Available at: https://www.ifrs.org/

/media/project/disclosure-initative/better-communication-making-disclosures

more-meaningful.pdf [Accessed 11 Jan. 2020]


Reference. (2020). What Are Perceptual Barriers of Communication?. [online] Available

at: https://www.reference.com/business-finance/perceptual-barriers

communication-a6b992d771c17ef8 [Accessed 12 Jan. 2020]

Friedman, A. (2020). What Are Language Barriers?. [online] Theclassroom.com.

Available at: https://www.theclassroom.com/what-are-language-barriers

12082501.html [Accessed 12 Jan. 2020]

Ritter, A. (2012). What is this interpersonal barrier? [online] Quora.com . Available at:

https://www.quora.com/What-is-this-interpersonal-barrier [Accessed 12 Jan.

2020]

Вам также может понравиться