Academic journal article Academy of Strategic Management Journal

Financial Statements as an Information Base for the Analysis and Management Decisions

Academic journal article Academy of Strategic Management Journal

Financial Statements as an Information Base for the Analysis and Management Decisions

Article excerpt


With the development of market relations information support for management decisions becomes increasingly important. Processes and events being under way in organizations, results of financial and economic activity are disclosed by a variety of information which in turn collectively forming information base for analysis. The lack of necessary information and the use of unreliable or irrelevant data are the causes of serious mistakes in management decisions. It is believed that the main purpose of the use of information, above all, should be to reduce uncertainty in decision-making. Economic analysis and reliable decision-making is only possible if there is the most complete information about the economic activity of an economic entity. Thus, an analysis contains technical, technological, and other information, and is not limited to economic data. This is due to the fact that in carrying out complex economic research, an information base of the analysis should be developed with a view to its use within not a single problem, and a complex of analytical problems. This information may be obtained from various sources the main of which include (Ushakova and Mukhametzyanov, 2015):

1. economic legislation in the country;

2. the charter of the organization that reflects the types of its activities;

3. norms and standards used by the organization;

4. accounting data of the organization;

5. financial and statistical reporting of the organization;

6. control checks and special auditions data;

7. information from data bases of organizations and various non-system information.

Thus, we can say that it is necessary to use all possible sources of information for economic analysis and management decision-making.

The key place among the information needed for the analysis is taken by accounting data and financial statements of a company as they contain the most important and reliable information about the activities of an economic entity. This information is grouped in various forms of reporting and bookkeeping records on the basis of the information classification principles (Izmestyeva, 2009).

Company's books provide summary information which summarizes and presents business results in generalized terms.

In the Russian Federation the order of presentation of financial statements, their volume and content are regulated by the Federal Law ?402 - FZ dated 06.12.2011 "On Accounting" and the Accounting Regulations 4/99 "Accounting reporting of an organization" (Federal law ?402FZ "About accounting", 2011).

Accounting and reporting information is used as the basis for monitoring the implementation of plans and forecasts, as well as the efficient use of material, financial, labor, and other resources which share accounts for more than 70% of management information.

A special place is also taken by information from managers, and the professionals of an organization that are directly involved in production and economic activity of the economic entity.

At the present stage of improving the business management, increased requirements are presented to the accounting information. It must be of high quality and be effective, it must meet the requirements of internal and external users of information. In addition, it is desirable that the financial statements would contain as little as possible indicators, but to satisfy the maximum number of users at different levels of management. Accounting information must be necessary and appropriate, and be formed with the least expenditure of labor and time. Obviously, it is necessary to use different methods for collecting, processing and accounting information to meet all the above requirements (Kulikova et al., 2014).


According to the statistics, the accounting data of the Russian companies for a number of years, as a rule, are not comparable due to the frequent changes in accounting policy caused by the changes in legislation, in registration forms, as well as the inability to take inflation into account. …

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