There is no denying the fact that the report prepared by the government for internal and external use are perpetually governed by the principles and concepts of the government accounting system.
Accuracy: The term "financial statement" is general and is probable to cover like chalk and cheese the broader meanings for altered groups. Reports should be appropriate for the intended users and prepared according to specific standards for their form and content. The specification of standards implies a mutual understanding between the user and the provider on the nature and content of financial information and does not necessarily require a decree, an executive order, or legislation. Rather, convention may serve this function.
Significance: The reports should be relevant to the user who is real. But there is no one typical user with defined and immutable characteristics. The important question is: What changes are needed in the presentation of financial reports to be of service to the prospective user? In the process of making these changes, a determination needs to be made to avoid manipulating inherently complex information, because attempts to simplify it may rob it of its significance. In this regard, Likerman suggests, the report should (a) minimize jargon and acronyms and not be patronising, (b) have a logical structure and layout, (c) have a summary of key points, (d) not have an overwhelming amount of detail, (e) not be unduly distorted by public relations considerations.
Reliability: The characteristics of reliable information are somewhat difficult to enumerate and explain. As a discipline, accounting necessarily implies the verification of facts; some reports may contain information derived from estimates. The degree of estimation determines the reliability of the data.
Implication: One common criticism of government financial information is that there is a surfeit, not a shortage. Many accounts are prepared and provided without taking into account the user's needs. Relevance cannot be assumed. Users must be purposefully identified and distinguished by type and by interest.
Materiality: The data reported should provide a frame of reference for comparing organisations with similar functions so that the costs of providing similar services can be estimated. The provision of comparable data can also involve rearranging data to conform with the classification selected. Thus, annual accounts, which are generally arranged in terms of appropriation categories, would need to be reclassified. Providing comparable data is yet another manifestation of being responsive to user needs.
Appropriateness: If information is supplied long after the event for which it is intended, the message to users is that compliance is perfunctory. In most governments, however, accounting data are not released until they are approved or cleared by the audit agency. Sometimes, delays may result from undue efforts to be precise. Although a lack of precision may affect reliability, there is an inevitable trade-off between precision and timeliness. For the sake of timeliness, some precision may have to be sacrificed.
Steadiness: The reports should be consistent over time in terms of the nature of the entity reporting, classification, and the accounting basis. Consistency facilitates the preparation and use of data and leads to a mutually acceptable framework.
Expediency: The final criterion for financial reporting is usefulness. To be useful both inside and outside an agency, reports should contribute to an understanding of the current and future activities of the agency's sources and uses of funds and the diligence shown in the use of funds.
The Accounting Standard emphasises that in a financial statements the following qualitative characteristics must exist:
Importance - information must have the ability to influence the economic decisions of users and be provided in time to influence those decisions.
trustworthiness - (a) information must be dependent upon to represent faithfully what it either purports to represent or could reasonably be expected to represent, and therefore reflects the substance of the transactions and other events that have taken place; (b) the information must be free from deliberate or systematic bias and material error and (c) in its preparation under conditions of uncertainty, a degree of caution must be applied in exercising necessary judgements.
Comparable - information is comparable if it enables users to discern and evaluate similarities in, and differences between, the nature and effects of transactions and other events over time and across different reporting entities.
Understandable - information is understandable if it can be understood by users that have a reasonable knowledge of business and economic activities and accounting and a willingness to study with reasonable diligence the information provided.
It is significant that in order to write on financial reporting mean writing about the lack of information on the financial status of the government. There is a general impression that, notwithstanding periodic pronouncements about transparency and the availability of information about the financial implications of proposed or ongoing policies, there is very little organized information. What is provided is frequently incomplete, incomprehensible, or out of date. Government operates within an environment, where, in most of the cases, information is not focused and judged simply on the basis of 'bottom line' profit figures, hence the existence of certain differences between the private and public sectors in terms of the objective of financial reporting.