The role of financial reporting for the development of business: evidence from Latvia

Abstract

It is well known that the financial statement is the basic source of the financial information on the companies‟ activities in the business world. Not casually, Accounting is often said to be the „language‟ of business. The purpose of the financial reporting is presentation of objective and useful information on activity of the company to the broad audience of users. To what extent the information contained in the financial statements is objective and useful is determined by two factors: regulation and presentation of statements. The given paper reveals the problems of preparation of financial statements by Latvian companies, which occur because of regulatory legislation‟s imperfection and its differences with international standards, and also because of its accounting practices. The aim of this paper is to provide recommendations on financial statement quality improvements, which would ensure adequacy of financial information disclosure on Latvian companies‟ activitities and comparability of indicators of the financial reporting for international users. The qualitatively prepared financial statement, including the Intellectual Capital Report, the author considers as a factor, which ensures the strengthening of investment attractiveness of Latvian companies and development of Latvian business in the European market.