The Transformation of Financial Reporting from the Perspective of Theory and Practice – Main Directions of Changes in the 21st Century

Abstract

The existing financial information, presented in a traditional financial statement is insufficient for the stakeholders functioning in the conditions of market economy focused on knowledge and information; therefore financial reporting is subject to transformation. The analysis of financial reporting theory and practice allows distinguishing several directions of the occurring changes. The transformation of financial reporting is dominated by the practice, which «dictates» the need for extended information. The theory still seeks a scientific justification for practical applications. The scope of presented information was extended from financial, numerical and retrospective information to non-financial, descriptive and prospective information. Therefore a financial statement is evolving towards a financial report and a business report, to end up as an integrated report.