What is financial reporting?
Today we have a topic with us is called financial reporting.
Now what exactly financial reporting is all about seen financial reporting is something that every company does and they have to do there is no option for listed companies it is very much you know by default they need to do it because that reporting goes to all the stakeholders around the globe it’ll be investors clients customers or probably your creditors, bank loans so it can be anything and anything and everything financial reporting is gonna play a massive role because they will see this they will analyze and then based on that they will take a concise decision that whether this is an appropriate thing whether to go for this
company or not so we will try and learn this.
what is the financial reporting part now see financial reporting?
It is the communication of important financial information and other activities of the organization to various stakeholders for helping them to get an idea about the actual financial position of the organization at any point of time, So this is important for private companies as it is for listed public companies now various stakeholders interested in the financial
reports of any organization are investors, you know Kratos they are investors creditors bankers agencies okay and finally the government okay.
So in today’s economy of the world, we have a good developer banking ecosystem of investor venture capital that is VC funds and let’s call them entities with E financial resources okay so, on the other hand, there are very well-developed financial reporting for business houses and also emerging.
What we call as businesses so financial reporting business may be in need of the what we call as finance and investment to okay at some point of time in their lifecycle or other but let’s call them entities in the need of the financial resources, So the thread which brings this stakeholder on a common platform is the financial reports.
Incorporate the objectives over here of financial reporting in accounting C to handle to
highlight the achievement of the company on a periodic basis so the achievement can be financial in nature like increase in sales profits market share as well as you know achievements can also be in the form of awards recognition and the breakthrough that is in R&D research and development, so to provide the financial information about the company to investors creditors bankers public agencies and government.
They all are included now it is also used as it is also used for to market themselves it is also used for marketing themselves by companies you know which depends on external funding they do absolutely external funding part investors, they depend heavily on the reporting for making their yes or no decisions so does it helps in what we call as capital raising.
They also help in to convey the strategic roadmap okay for the future of the company during the trying times or loss-making phases it is used to allay the investors the concerns in strategy plant for turning around the company so it helps the customers in informed about the status of the company and there by building confidence level internal financial reporting in accounting you know on the periodic basis is used by some companies to keep their employees well-informed so it’s called internal financial reporting.
Now to comply with these statutory requirement organizations are required to file reports they are required to file reports to various agencies like ROC governments Stock Exchange on a quarterly basis on a quarterly basis and on annual basis so to provide information about how the companies utilizing various resources of is available is at its disposal now we will try and incorporate.
what constitutes the and chill reporting in the accounting part?
Fine see as the name goes the financial reporting typically constitutes the overview of the financial performance okay it’s a financial report maybe it can be quarterly it can be annual or it can be you know preliminary so there are some key highlights first as the financial statements now this includes balance sheet we have profit and loss accounts CFS cash flow statements.
Some companies may have both the stand-alone and consolidated financial statement if it is having two or more different units then these statements are pure.
what we call as quantitative in the reflection of the performance of the organization second is the director’s report now what goes in here see it provide an explanation of the financial statement it provides info about the operational performances and in major highlights and achievements during the bad performances and you know during the bad performance period it provides the reason for the underperformance, also now the third part that we are going to discuss is the management discussion and reporting so this is called the MDA report.
So when we talk about the MDA report it provides information on the info on the current position of the company okay it provides the current position of the company Reserve as the industry fears one gets to know about the industry trends.
So it also contains information about the future strategies and opportunities fourth is the capital structure so over here information on the stakeholders about the capital structure of the organization and you know changes, there in if any fifth is the notes to accounts so over here they incorporate the methods and the accounting policies the companies used to record the transactions.
The sixth is the auditors report now if we talk about auditor’s report they provide you know independent opinion this is very important what they provide open and they are not gouging there the future potential or the future estimates they will never do that the only thing that it they do is they give the opinion.
On the financial statements and how far they are accurate, they show the true and fair value of the financial statements and as well as the accounting policies to they should also show for the details for accounting policies that are used by the that I used by the company.
So now the seventh is the corporate governance report okay so we hear it provides info on the composition it provides a report on the composition of the BOD board of directors and the profile it also talks about the remuneration that is paid to the top management and the compliance part.
okay, and other you know state requirement that is in no statutory comment the next that comes in our way is prospectus well you know for a company going for IPO the prospectus it contains.
All the information it contains all the information about the financial operations management okay and also the product mix so that includes financial reporting okay for business goals of the organization.
The next that goes is the earning calls see earning calls are generally in own teleconferences and where the financial performances of the company during the year a particular period are discussed with the investors and the financial reporting analysts so on the concluding note.
I can say that in short, we can say that you know it’s an ecosystem for the information you know which can be used by various stakeholders for multiple objective financial reporting accounting and good practice can you know to improve the efficiency of the market as the information is easily available to all the stakeholders so that’s it for this particular topic if you have learned and enjoyed watching this video please like and comment on this video and subscribe to our channel for the latest updates thank you everyone Cheers .
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