On October 13, 2006, Professor Solomon N. Darwin of UC Berkeley, gave a lecture to attorneys on the nuts and bolts of financial reporting.
Solomon began with a quote from Albert Einstein illustrating that not everything is relevant and at the same time, financials do not contain everything in that the true value of a company cannot be shown on a balance sheet.
The objectives of financial reporting are to provide information to present to investors and creditors who use the information to make financial decisions; to assess the amounts, timing, and uncertainty of cash receipts; and to reflect on the economic resources and decide whether to change them.
Financial reporting information must be relevant in order for the user to make a decision, and to predict events by confirming expectations. The information needs to be reliable. It should be audited to verify the results. The information needs to be comparable to those of different companies. The information needs to be consistent in order for performance to be comparable from year to year to enable judgments.
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