A review of financial reporting from a range of construction industry sectors

Annual reports have changed quite dramatically between mid(prenominal) 1970s and today. The overall amount of information given has increased considerably, and this is equally true for the financial statements and the intervention section of the annual report.New financial statements have emerged with the funds flow/cash flow statement or more recently the statement of total recognised gains and losses, and existing statements now offer a greater level of dis-aggregation.In addition to the basic financial statements underwriters expect to find schedules of contracts in progress and accurate contracts and a reconciliation of the income and the costs of these contracts to the current years income statement.Certain balance sheet accounts are unique to the construction labor costs in excess of billings on uncomplete contracts (an asset) or billings in excess of costs (a liability). using the percentage of completion method costs in excess of billing result when the billings on uncom pleted contracts are less than the income get to date.These under billings result in increased assets. Conversely, where billings are greater than the income earned on uncompleted contracts, a liability, billings in excess of costs results. Many bonding companies request some other specific information as supplementary data. A timely and detailed response can try many answers to bonding agents questions and increase the likelihood of a positive reaction to a request for bonding.The absence of the appropriate and sufficient information in the financial statements go forth give rise to scepticism and, at the very least, additional questions from the survey.As a result the TABULAR DATA OMITTED bonding agent will be seriously inhibited in his or her attempt to convince the insurance carrier that the reward outweighs the find of infection of providing performance bonds for the contractor. (Dufek, 1992)2-2- Shareholders Users of annual reports are many and varied, but it is general ly agreed that investors form one of the largest and nigh important groups of potential users (Day, 1986). It is generally recognised that information contained in company financial reports should be recyclable to shareholders in their investment activities.Yet if annual reports are to succeed in being a primary doer of communication between the business enterprise and its shareholders, they must contain disclosed information that shareholders need in order to take their investment decision (Lee and Tweedie, 1975).2-3- Disclosure of risk As defined by the ASB (1998) risk is Uncertainty as to amount of benefits. The term includes both potential for gain and exposure to loss. Risk therefore is essential to an enterprise, because it is inherent in the pursuit of opportunities to earn return for its owners.It follows that in order to understand the right way the potential for the future performance of any company investors need a proper understanding of the risks it undertakes. Thi s will be based on the following information