Financial Reporting: Objectives, Importance, and Regulations Explored

This essay provides an overview of financial reporting, emphasizing its importance in disseminating financial information to stakeholders such as government agencies, creditors, investors, and the public. It highlights the role of financial reporting in complying with regulatory requirements, facilitating statutory audits, and serving as the backbone for financial planning and decision-making. The essay discusses the objectives of financial reporting, which include providing information for management, creditors, investors, and the public to make informed decisions, as well as detailing how an organization procures and manages resources. It also contrasts financial reporting requirements for private firms in the United States and Europe, noting differences in disclosure obligations based on asset value and regulatory mandates. The essay concludes that financial reporting is vital for stakeholders, providing relevant and reliable information for various purposes, despite potential complexities in disclosure.

Financial Reporting

INTRODUCTION
Financial reporting can be described as the publishing of the financial information to the different types of the stakeholders
associated with the business entity. The financial information consists of financial position and the financial performance of
an organization over a specific period of time. The various types of the stakeholders include the government agencies,
governments, debt providers, public, creditors, investors (Leuz & Wysocki, 2016).

IMPORTANCE OF FINANCIAL REPORTING
The financial reporting highlights the following importance.
• It assists the organization to comply with the different types of the regulatory requirements and the statues;
• Statutory audit is if facilitated through the financial reporting;
• Financial reports are called the financial backbone of financial planning, bench marking, analysis and decision making;
• Reporting helps the organizations to raise the capital both at the overseas and at the domestic level (Nobes, 2014).

OBJECTIVE OF FINANCIAL REPORTING
• Financial reporting provides information so that an organization can be managed and is used for the purpose of decision
making, benchmarking, analysis, planning; financial reports provide information for the creditors, debt providers,
promoters, investors and is used for prudent and rational decision making;
• It provides information for the public, shareholder and in different aspects of an organization;
• It provides information regarding how an organization is procuring the various resources;
• It provides information for the various stakeholders regarding the performance management of an organization (Pelger,
2016).

Financial reporting and institutional features in the
private firms that are located in Europe and US
• The United States Securities Exchange Act states that only the public companies that have the asset value of exceeding 10
million dollar have to produce the financial statements. Whereas, in comparison to the public firms the private firms need
not to provide the financial reports to the general public.
• The 7.6 million companies in Europe is required by law to file the financial statements. The European regulations requires
that the private companies need to disclose the financial reports to the general public (Habib, Ranasinghe & Huang, 2018).

CONCLUSION
It can be concluded that that financial reporting is vital from the perspective of a shareholder and stakeholder. Although at
certain situations publishing or disclosing the financial reports can be complex, but it has some benefits attached with it.
Financial reports consist of the information that are both relevant and reliable and it is used by a number of the
stakeholders for the various purposes.

REFERENCE
Habib, A., Ranasinghe, D., & Huang, H. J. (2018). A literature survey of financial reporting in private firms. Research in
Accounting Regulation, 30(1), 31-37.
Leuz, C., & Wysocki, P. D. (2016). The economics of disclosure and financial reporting regulation: Evidence and
suggestions for future research. Journal of Accounting Research, 54(2), 525-622.
Nobes, C. (2014). International classification of financial reporting. Routledge.
Pelger, C. (2016). Practices of standard-setting–An analysis of the IASB's and FASB's process of identifying the objective
of financial reporting. Accounting, Organizations and Society, 50, 51-73.