Abstract

In terms of economic globalization and digitalization, the enterprise’s financial reporting is a communication channel for transferring accounting information to stakeholders. The full and effective perception of user credentials is threatened by communication barriers that could lead to erroneous management decisions. Thus, it is necessary to improve financial reporting through feedback mechanisms to minimize the negative impact of communication threats to the accounting system. The purpose of this article is to identify basic communication of financial reporting, their minimization through ensuring the transparency of accounting information and calculation of analytical indicators. The article highlights the basic communication barriers to the perception of accounting information, which include unclear financial reporting indicators due to different interpretations of accounting concepts; the inadequate level of knowledge of the subjects of the communication process (communicator and recipient); the inaccuracy of information due to intentional or unintentional actions; lack of clarity in accounting regulations on the interpretation and structure of individual objects of accounting; information oversaturation; availability of non-target communications; availability of informal communications; inefficiency of the communication channel. The influence of communication threats to the accounting system on the example of forming the Ukrainian form of financial reporting Balance (Financial Statement) is substantiated. It is proposed to transform the form of financial statements Balance Sheet (Financial Statement) in Ukraine by separating two sections in assets «Non-current assets» and «Current assets») and three in liabilities («Equity», «Long-term liabilities» and «Current liabilities») to optimize the analysis of the financial condition, which will contribute to the effective perception of accounting and analytical data by stakeholders. The criterion of minimizing the impact of communication risks should be used to transform other forms of financial and integrated reporting. The proposals could be useful in reformatting financial reporting forms in other countries to ensure transparency and maximize the perception of accounting information.

Keywords: financial statements, communication barriers, communication links, information users, transparency of financial statements, balance sheet (statement of financial position), liquidity ratios.

JEL Classification: M10, M40, M41.

Cite as: Zadorozhnyi, Z.-M., Ometsinska, I., & Muravskiy, V. (2021). Determinants of firm’s innovation: increasing the transparency of financial statements. Marketing and Management of Innovations, 2, 74-86. https://doi.org/10.21272/mmi.2021.2-06

This work is licensed under a Creative Commons Attribution 4.0 International License

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