TABLE OF CONTENTS Imagine that a cross section of society have been gathered in a large room, and each participant asked to write down what they perceive as the purpose of financial statements. The answers would be many and varied with some claiming that they are an academic exercise with no bearing on the real world, others suggesting they are misleading because accountants are trained to 'always make it look better than it really is', and yet some claiming there must be something to it as all businesses seem fixated with numbers.
By contrast if the same room had been occupied by captains of industry, financial analysts and potentially most significantly the providers of finance the response would have been very different. The financial statements of an entity would be perceived as a key building block in understanding both the past performance of the business and its future prospects.
There is clearly a sizeable gap between the expectations of different groups and this has served to do financial statements a huge injustice. Dismissed as irrelevant or understood only by specialists with years of training appears to leave little middle ground.
The truth about financial...
