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BLOG: FINANCIAL REPORTINGWHAT IS FINANCIAL REPORTING?
FINANCIAL REPORTING2ndAugust 2019In every industry, whether it is manufacturing, retailing, or service, it includes multipledepartments. All these departments work together on a daily basis in order to achieveorganisational goals and led a business organisation towards growth. The functions of theseorganisational departments sometimes found interdependent or dependent, but at the day end, allthese departments are linked together by the Accounting and Finance department. Forconducting every single function related to business operation, each of the department needstangible and intangible resources like fund, manpower and more. The fund allocated to eachdepartment for functioning needs to be accounted properly because the act of utilising fundreflects in an organisation's profit generation which is computed and monitored by theAccounting and Finance department. The accounting and financial aspects related to every singledepartment of a business organisation are recorded as well as reported to different types ofstakeholders of the organisation. The two different kinds of reporting arefinancialreportingwhich is made forthe stakeholders,andmanagement reportingwhich is used by theorganisation’s internalmanagement.Both these two types of reporting are vital as well as an integral part of a business organisation’saccounting and reporting system. Among these two corporate reporting systems, financialreporting is the critical and most important task for every business organisation. It is vital due tothe presence of various stakeholders those who are involved in the organisation, and the existingstatutory and other business related regulatory requirements. Financial reporting is a veryimportant part of a company’s Corporate Governance. The system of financial reporting allows acompany to produce a number of statements which are able to disclose itsfinancialstatus, futureas a corporate to its management board, shareholders, potential and existing investors, and otherexternal and internal stakeholders. Proper financial reporting practices led a company to ensureits sustainable corporate growth and development by creating a long-lasting trustworthyrelationship with stakeholders and complying with the regulatory requirements.
Discussion on Financial Reporting along with Definition and ExamplesFinancial reporting is the process of communicating with the users of a company's financialstatements by providing them financial statements containing financial information of thecompany. Here, the key users of financial statements of a company are its creditors andinvestors. The financial reporting system is viewed as business organisations issuing theirfinancial statements to the public. A company’s financial statements that are prepared forfinancial reporting purpose include the company’s income statement, balance sheet,statement ofowner’s equity, and cash flows statement. However, financial reporting is much broader than justpreparing and publishing the above mentioned four types of financial statements.Financialreportingsystem involves the disclosure of a company’s financial information in fronts of themanagement as well as to the public (if it is a publicly-traded company) about the way thecompany is performing during a specific time period.Usually, financial reports are issued on an annual and quarterly basis which is not sameasmanagement reporting. Management reporting also includes financial information about acompany but that is only disclosed in front of the company’s management board to assist them inmaking business decisions. Financial reports of a company are attached to the annual report of apublic company. Moreover, this kind of reporting includes every financial communicationbetween the business and outsiders. It includes press releases, management letters along withtheir analysis, shareholder minutes, auditor reports, and required notes in relation to the fourdifferent financial statements. In general term, anything that has the ability to convey financialdata and information about a company to the general public is treated as some kind of financialreporting. The main aim of financial reporting is to reflect a company’s current financialposition.As discussed above, financial reporting is not only reporting company's financial information tothe public. Other than annual financial statements, one of the common forms for a company'sfinancial reporting is management discussion and analysis i.e. MD&A which is issued by themanagement board that discusses the company's current financial position and speculates on itfuture performance along with discusses on the potential market opportunities. A company'smanagement also discusses the company's debt arrangements system, capital resource, andliquidity position. MD&A stands as a great element for creditors and investors to get some