Introduction
Human life has become complicated and, thus, necessitated the need to have an elaborate approach to various issues. The world of business has undergone various transformations to be at par with the demands of modernization. Competitions among various businesses have led to the invention and innovation of various ways of ensuring every business manages to withstand the tastes of time with regard to their relevance to consumers. Consequently, all businesses have adopted different ways of taking, recording, analyzing, and keeping their financial statements to assess the viability of their projects (Francis and Schipper 9). This report summarizes the relevance of various financial statements in assessing business activities to achieve their targets, missions, visions, and objectives.
Literature Review
This report is based on the contributions of Jennifer Francis and Katherine Schipper in their article titled Have Financial Statements Lost Their Relevance? This article is commonly used to evaluate the relevance of financial statements with regard to assessing the performance of any business. They approached business financial documents through two perspectives that include the way such documents are relevant to the business in terms of their timing and the performance data collected within a given time. The timing of any financial document is vital in shaping the performance of any business since it gives an insight into the current situation of a business.
The second approach is analyzing financial statements in terms of their effectiveness in producing tangible results in any business. They argue that financial statements do not play a major role in shaping and determining the fate of any business activity (Francis and Schipper 25). The function of designing these statements is to help management in planning their activities towards improving the performance of their businesses.
According to their evaluation, these statements do not have the ability to account for the impacts of central measures on the prevailing market values of goods or services. This means that these statements are theories that can not be used to explain the cause of various situations in any business. In addition, the earnings do not have the ability to account for annual market and adjusted returns that form the basis of testing the strength of a business. This means that the income generated by any business is not subject to the prevailing market conditions and, thus, does not help assess the profits or losses of any business. It is very difficult for the value of assets to explain the market value of business equity.
These statements become irrelevant when analyzing the performance of any business. The application of accounting skills in modern business activities is an exercise in futility since businesses have changed compared to the way they used to be yet accounting courses offered in learning institutions do not reflect the demands of the changes that are experienced by businesses every day. The changes in the financial analysis do not reflect the business contents and perspectives of inflations and this makes these statements irrelevant.
Conclusion
There is a great need to relate business statements with the actual activities that go on in business activities all over the world. Modernization has forced businesses to experience various changes that need to be reflected in the curriculums of business studies to enable accountants to be at par with the changing world.
Works Cited
Francis, Jennifer and Katherine Schipper. “Have Financial Statements Lost their Relevance?” Journal of Accounting Research , 37 (2) (1999): pp. 319. Print.