Selected Financial Reporting Objectives (IFRS)

The purpose of this paper is to provide a concise synopsis of these guiding accounting principles for the benefit of researchers in entrepreneurship and venture capital investing who may not have a professional financial accounting background. This information should also be useful to the same audiences for understanding a key influence in the financial management lens perspective I use in my dissertation in the course of interpreting extant literature in those domains, as well as interpreting my own primary research data in the form of venture capitalists’ responses to semi-structured interviews.

In summary, the Framework that underlies most of the world’s accounting and financial reporting contemplates that investment decisions (including those made by venture capitalists (‘VCs’) in GOEVs) are based on their expectations of GOEVs’ future net cash flows and their assessment of management’s ability to use enterprise resources effectively and efficiently in generating those expected economic benefits. Such expectations and assessments are for purposes of helping them estimate an entity’s value1 as it relates to buying (investing) and selling (exiting) their equity interests in GOEVs.

In particular, the IFRS Conceptual Framework highlights the key users of financial information (primarily investors - like VCs), their objectives (e.g. generating ROI), and the decisions they make, all of which are oriented towards "estimating the value of the [investee] entity". For more insights, including the importance of revenues and cash flows, please refer to the complete article.