incompatible with each other. At the end of the nineties appeared XBRL - extensible business reporting language for the exchange of structured business information that is widely accepted. XBRL is the financial reporting led to the Internet and facilitate communication with information from the financial statements to numerous users.
Keywords: accounting information system, financial reporting, information, International Accounting Standards / International Financial Reporting Standards, XBRL standard
1. INTRODUCTION
Accounting information system if it is well organized should present the relevant information from the financial statements of financial position, asset and profitable position, ie. on the effects of activities of the company. In the twenty-first century, it faces with many challenges and opportunities. Financial statements establish communication between the information generated within the accounting information system and the many different users of the information. Conceptual Framework and International Accounting Standard 1 (as it provides the core structural elements of financial statements that are required for all companies when creating financial reports throughout the world) are very important elements in the function of harmonizing financial reporting. The effects of management decisions are looked at from the point of impact to moving the performance and value of companies, periodically are reviewed and evaluated through the financial statements and the specific economic analysis. Mentioned was made much easier due to the application of modern information technology. Online exchange of information is carried out with the XBRL standard based on XML - standardized business language for transmitting data over the Internet. This paper will discuss the importance of professional legal regulation in the financial reporting and business intelligence within the XBRL International Standards.
2. SIGNIFICANCE OF REGULATORY FRAMEWORK IN THE FINANCIAL REPORTING PROCESS
Throughout the world, many companies prepare and create financial statements for external users. Though these financial statements may look like similar from country to country, but there are diversities due to different social, legal and economic circumstances. Mentioned different circumstances have led to the use of different definitions of the constituent segments of the financial statements, such as the assets, liabilities, equity, income and expenses. They have resulted in the use of different criteria for the recognition and measurement in financial statements. That is why the International Accounting Standards Board has the task to reduce the differences with effort to harmonize regulations, accounting standards and procedures relating to the preparation and presentation of financial statements. The Board focuses on the harmonization of financial statements that are compiled to provide information relevant for decision making in the economic sphere.Thus prepared financial statements meet the common needs of most users. Economic decisions are made by almost all users, for example:
(Conceptual Framework for Financial Reporting (2014), p.3-4.),
To decide when to buy, hold or sell a share in the capital, To assess the stewardship or responsibility of management,
To assess the entity’s ability to pay and provides other benefits to its employees, To assess the safety of the amount lent entity,
To determine tax policy,
To determine the profit and dividend distribution, To prepare and use national income statistics, and To regulate the activities of the entity.
Mentioned Board is aware that the state institutions of various countries for their own purposes may establish different or additional requirements. The above mentioned requirements should not affect the financial statements that are published in the interests of other users. In accordance with the accounting model based on recoverable historical cost and the maintenance concept of nominal financial capital financial statements are usually prepared. The conceptual framework is drawn up so as to be applicable to a range of accounting models and concepts of capital and its maintenance.
The purpose of the conceptual framework is:
To assist the Board in the development of future IFRS as well as the review of existing IFRS,
To assist the Board in promoting harmonization of regulations, accounting standards, procedures relating to the presentation of financial statements by providing a basis for reducing the number of alternative accounting treatments allowed by IFRS,
To assist national bodies responsible for setting standards in the development of national standards, To assist persons who prepare financial statements in the application of IFRS, as well as in addressing issues that have yet to become the subject of IFRS,
To assist auditors in forming an opinion about whether the financial statement in accordance with IFRS,
To assist users of financial statements in interpreting the information contained in the financial statements prepared in accordance with IFRS, and
To those who are interested in the work of the IASB with information about its approach to the formulation of IFRS. (Conceptual Framework for Financial Reporting (2014), p.4.),
Base of the conceptual framework makes the target of general-purpose financial reporting. Providing financial information about the company is a point of general purpose financial reporting. The information obtained from the reports are the benefits to all stakeholders ie. customer (lenders, existing and potential investors and other creditors).
Since the yield (dividend, the increase in the market price, the payments for principal and interest) that investors expect from investing in debt instruments or the purchase, sale and holding of equity instruments depend on the decisions of investors (both existing and potential). Expectations of lenders, investors and other creditors are depending on their assessment, dynamics, amount and perspective future net cash inflows to the company. As noted, investors need information on which they will be able to estimate the future cash flows of the company. Necessary information in good part they take in general purpose financial statements. They are actually the primary users of the information from mentioned financial statements. The financial statements provide information in order to be able to assess the value of the company by investors, lenders and other creditors. General purpose financial statements do not provide the full necessary information to them. To make a proper business decision should be supplied with relevant information from other sources also, such as the perspectives of enterprises and the economy, the political climate, general economic conditions, etc.
In the process of developing standards of financial reporting The Board strives to provide the required information for the largest number of primary users. Information about financial position, ie. the economic resources of enterprises, the effects of transactions that change the company's resources are useful for decision making.This is so because they are the basis for identifying financial strength (liquidity, solvency, the need for additional financing) and weaknesses of the company. Information on the results of operations help many users to understand the yields that the company realized with its available resources. Also, this information shows how management do their activity of efficient and effective using of company resources. For the evaluation of past and future capability of the company, for the accumulation of net cash inflows are important information about the result of the firm. Also, the company's ability to cumulate the future net cash flows provide information on the company's cash flow because from them we can see how the company spends cash, borrow, how pay off debts and other indicators that can affect both the liquidity and solvency. Assessment of financing activities and investing, liquidity and solvency provide information on cash flows (for more details see Conceptual Framework for Financial Reporting, Chapter 1).
Information from the general purpose financial statements to meet many users must be relevant, useful, credible, verifiable, comparable, timely and understandable. (for more details see Conceptual Framework for Financial Reporting, Chapter 3).
Accounting information system of the company has a duty to provide financial reporting for which quality and relevance is with management of the company directly responsible. The key assumption for making quality business decisions is the quality of information. This is why the need to improve the quality of financial reporting becomes more and more important.
International Accounting Standard 1 - Presentation of Financial Statements (IAS 1 below) provides the basis for presentation of general purpose financial statements, sets general requirements for the presentation, gives guidelines for their structure and makes minimum requirements for their content ie. prescribe the basis for presentation of financial statements that is it’s main goal. It applies to all general purpose financial statements.
A complete set of financial statements under IAS 1 includes: a report on the financial position at the end of the period, a report on the profit or loss and other comprehensive income for the period, statement of changes in equity for the period, cash flow statement for the period, notes comprising a summary of significant accounting policies and other explanatory information, comparative information relating to the previous period and a report on the financial position at the beginning of the previous period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements or when it reclassifies items in its financial statements. (IAS 1, paragraph 10) The above- mentioned set of financial statements is otherwise called the Annual financial statement.
However, under the new Law on Accounting regular annual financial statement entities that apply IFRS include: balance sheet, income statement, statement of other results, statement of changes in equity, cash flow statement and notes to the financial statements. Micro-entities prepare a regular annual financial report that includes a balance sheet and income statement. Regular annual financial statements of other entities (political, trade union organizations, foundations, chambers, churches, etc.) includes a balance sheet, income statement and notes to the financial statements.
It is evident that the professional and legal regulations is in conflict as far as the name of mandatory annual financial statements. In Serbia, the prevailing is legislation. Association of Accountants and Auditors of Serbia as a member of the International Federation of Accountants (IFAC) has translated IAS / IFRS in 2009. provided that translated the five new IFRS which came into force on 2013th (four of them), and one will come
in 2015th. Translation of these standards The Ministry of Finance published in the Official Gazette No. 35
until March 27th of 2014. (no sooner), and very important professional titles and certificates accountants are
canceled and they are actually crucial, because only a true certified professionals should be involved in the accounting profession because of the objectivity of financial reporting.
For recognition, evaluation, presentation and disclosure of items in the financial statements big companies apply International Financial Reporting Standards. Medium-sized enterprises can use International Financial Reporting Standards or International Financial Reporting Standards for Small and Medium Enterprises. Small enterprises can use the International Financial Reporting Standards for Small and Medium Enterprises. Micro enterprises can use Regulation issued by the Minister of Finance or International Financial Reporting Standards for Small and Medium Enterprises.
In Serbia until July 2013. valid was the Law on Accounting and Auditing (Official Gazette 46/06, 111/09 and 99/11) who was sorting companies into three groups, to large, medium and small, according to the criteria: average number of employees, operating income and average value of commercial property, which is replaced by the new Accounting Act of 16th July 2013. (Official Gazette of RS, no. 62/2013). companies are
divided into four groups, in large, medium, small and micro, which show the following table: Table 1: Types of enterprises
Legal entities are classified
according to size Applying the criteria of the Law on Accounting and Auditing Applying the criteria of the Law on Accounting
Large 1.163 552 (0,46%)
Medium 2.971 1.283 (1,07%)
Small 116.285 9.649 (8,01%)
Micro - 108.935 (90,46%)
Total 120.419 120.419 (100%)
From the table it is evident that Serbia has at the most micro enterprises (90,46%), at least large (0,46%).