- Learn Basic Accounting in Less than 1 Hour!
- Accounting Basics
- What are Accounting Principles
- Accounting Cycle
- Accrual Accounting Basis
- Cash Basis Accounting
- Matching Principle of Accounting
- Conservatism Principle of Accounting
- Cash Accounting
- What are Accounting Policies?
- Accounting Estimates
- Mark to Market Accounting
- Cash Accounting vs Accrual Accounting
- Operating Cycle
- Fiscal Year
- Fiscal Year vs Calendar Year | Top Differences | Examples |
- Financial Reporting
- Financial Statements
- Interim Financial Statements
- Consolidated Financial Statement
- Audited Financial Statements
- Accounting Scandals
- Quality of Earnings
- IFRS vs US GAAP
- IFRS vs Indian GAAP
- Accounting for Fair Value Hedges
- Debit vs Credit in Accounting
- Double Entry Accounting System
- Journal in Accounting
- Ledger in Accounting
- Journal vs Ledger
- What is Trial Balance ? | Examples | Steps | Prepare | Errors
- Reconciliation of Books | Types, Best Practices | Useful Tips
- Petty Cash | Meaning | Template | Accounting | Example
- Debit Note | Debit Notes Accounting & its Top Characteristics
- Credit Note
- Debit Note vs Credit Note | Top 7 Differences (Infographics)
- Balance Sheet
- Balance Sheet
- Accounting Equation
- Assets vs Liabilities | Top 9 Differences (with Infographics)
- Trial Balance vs Balance Sheet | Top 10 Differences You Must Know!
- Balance Sheet vs Consolidated Balance Sheet
- Bank vs Company Balance Sheet
- Commitments and Contingencies
- Management Discussion & Analysis
- Revenue Reserve vs Capital Reserve | Top 7 Differences
- Revenue Reserve
- Capital Reserve
- Capital Receipts vs Revenue Receipts | Top 8 Differences
- Capital Lease vs Operating Lease | Top Differences You Must Know!
- Debt vs Equity Financing | Advantages | Disadvantages | Example
- Internal vs External Financing | Top 7 Differences (Infographics)
- Available for Sale for securities
- Held to Maturity to securities
- Cash and Cash Equivalents | Examples, List & Top Differences
- Cash Equivalents
- Restricted Cash
- 3 Types of Inventory | Raw Material | WIP | Finished Goods
- Current Assets
- FIFO vs LIFO
- First In First Out (FIFO)
- Last in First Out (LIFO)
- LIFO Reserve
- Non-Current Assets
- Accounts Receivables? | Definition, Accounting Examples
- Accounts Receivables Factoring
- Allowance for Doubtful Accounts
- Accrued Revenue
- Liquid Assets
- Quick Assets
- Marketable Securities on the Balance Sheet | Top Examples
- Trading Securities in Balance Sheet
- Prepaid Expenses
- Tangible vs Intangible Assets
- Net Tangible Assets | Calculate Net Tangible Assets Per Share
- Tangible Assets
- Capital Expenditure (Capex)
- Salvage Value
- Residual Value
- Fixed Capital vs Working Capital | Top 8 Differences (Infographics)
- Impariment of Assets
- Negative Goodwill
- Accounts Payable | Days Payable Outstanding | Formula |
- Current Liabilities | List of Current Liabilities on Balance Sheet
- Accrued Liabilities
- Notes Payable
- Revolving Credit Facilities
- Bonds Payable Accounting
- Bad Debt Reserve Allowance
- Deferred Expenses
- Unearned Revenue (Sales)
- Deferred Revenue (Income)
- Current Portion of Long-Term Debt (CPLTD) | Balance Sheet
- Long-Term Debt in Balance Sheet
- Financial Liabilities | Definition, Types, Ratios, Examples
- Long-Term Liabilities
- Accounts Receivable vs Accounts Payable
- Minority Interest
- Accounting for Convertibles
- Accounting for Derivatives
- Financial Lease vs Operating Lease
- Off balance Sheet Financing
- Finance vs Lease
- Shareholders Equity
- Shareholders Equity Statement
- Negative Shareholders Equity
- Par Value of Stock
- Share Capital
- Outstanding Shares (Definition, Formula) | Stocks Outstanding
- Additional Paid-in Capital on Balance Sheet
- Retained Earnings (Formula, Examples) | How to Calculate?
- How to Calculate Net Worth of a Company | Formula | Top Examples
- Owners Equity
- Preferred Shares
- Weighted average Shares average outstanding
- Share Buyback
- Accelerated Share Repurchase
- Restricted Stocks Units (RSUs)
- Contingent Shares
- Stock Splits Share
- Treasury Stock Shares
- Dilutive Securities
- Anti Dilutive Securities
- Stock Dividend
- Cash Dividend
- Preferred Dividends
- Homemade Dividends
- Ex dividend date
- Date of Record of dividends
- Cost of preferred Stock
- Common Stock vs Preferred Stock | Top 8 Differences You Must Know
- Stocks Vs Shares
- Stock Options Vs RSU
- Shareholder Equity vs Net Worth | Top 5 Differences You Must Know!
- Stock vs Option
- Stock vs Mutual Funds
- Income Statement
- Income Statement | Top Examples | Template | Format | Analysis
- Cost of Goods Sold
- Direct Costs
- Indirect Costs
- Non Recurring Items
- EBIT vs EBITDA | Top Differences | Examples | Calculation
- Depreciation – Formula | Types | Most Comprehensive Guide
- EBITDA vs Operating Income
- Straight Line Depreciation Method
- Sum of Year Digits Method of Depreciation
- Declining Balance Method of Depreciation
- Amortization of Intangible Assets
- Unrealized Gains (Losses)
- Non Cash Expense
- Share based compensation
- Restructuring Cost
- Extraordinary Items
- Interest Income
- Double Taxation
- Net Loss
- Net Operating Loss (NOL)
- Tax Shield
- Sundry Expenses
- Interest vs Dividend | Top 9 Differences (with Infographics)
- EBITDA vs Net Income
- EBIT vs Net Income
- EBIT vs Operating Income
- Cost vs Expense
- Accounting Profit vs Economic Profit
- Income Tax vs Payroll Tax
- Tax credits vs Tax deductions
- Gross Income vs Net Income
- Profit vs Revenue
- Revenue vs Earnings
- Revenue vs Income
- Profit vs Income
- Revenue vs Sales
- Capitalization vs Expensing
- Income Statement vs Balance Sheet | Top 5 Differences You Must Know!
- Statement of Comprehensive Income | Items | Colgate Example
- FOB Destination
- Explicit Cost
- Implicit Cost
- Direct cost vs Indirect Cost
- Fixed cost vs Variable cost
- Nopat vs Net Income
- Marginal Costing vs Absorption Costing
- Cash Flow Statement
- Cash flow from Operations | Formula, Calculations & Examples
- Cash Flow from Investing Activities (Formula & Top Examples)
- Cash Flow From Financing Activities | Formula & Calculations
- Cash Flow Analysis
- Fund Flow Statement
- Direct vs Indirect Cash Flow Methods
- Cash flow vs Net Income | Key Differences & Top Examples
- Cash Flow vs Fund Flow | Top 8 Differences (with Infographics)
- Accounting Careers
- Accounting Interview Questions
- Financial Accounting Careers
- Top Accounting Firms
- Big Four Accounting Firms
- Forensic Accounting
- Cost Accounting
- Financial Accounting
- Accounting vs Engineering
- Finance vs Accounting
- Bookkeeping vs Accounting
- Accounting vs Auditing
- Bookkeepers vs Accountants
- Accounting vs Financial Management
- Cost Accounting vs Financial Accounting
- Cost Accounting vs Management Accounting
- Financial Accounting vs Management Accounting
- Public vs Private Accounting
- Accounting vs CPA
- Controller vs Comptroller
- Accounting Firms in Australia
- Accounting Firms in Canada
- Top Accounting Firms in US
- Accounting Books
What is Financial Reporting?
Financial reporting is the communication of important financial information & other activities of the organization to various stakeholders for helping them get the idea about the actual financial position of the organization at any point in time.
This is as important for Private companies as it is for listed Public companies. Various stakeholders interested in the financial reports of any organization are – investors, creditors/ bankers, public, regulatory agencies, and government.
- In today’s economy of the world, we have a well-developed banking ecosystem and capital markets, there is the separate ecosystem of investors, venture capital funds etc. Let us call them Entities with Financial Resources.
- On the other hand, there are well-developed Financial reporting for business houses and also emerging businesses. Financial reporting for businesses may be in need of finance or investment at some point in their lifecycle or the other. Let us call them Entities in Need of Financial Resources.
The thread which brings these stakeholders on a common platform is – Financial Reports.
Objectives of Financial Reporting in Accounting
- To highlight achievements of the company on the periodic basis. The achievements can be financial in nature like the increase in sales, profit and market share, as well as achievements, can also be in form of awards and recognition received, the breakthrough in research and development etc.
- To provide financial information about the company to investors, creditors, bankers, public, regulatory agencies, and government
- It is also used to market themselves by companies which depend on external funding. Investors depend heavily on this reporting for making their yes or no decisions. Thus it helps in capital raising.
- To convey a strategic roadmap for the future of the company.
- During trying times or loss-making phases, it is used to allay investor concerns and strategic plan for turning around the company.
- Helps customers keep informed about the status of the company thereby building confidence levels.
- Internal financial reporting in accounting on the periodic basis is used by some companies to keep employees well informed about own operations and financial position and as a tool to motivate them.
- To comply with statutory requirements. Organisations are required to file reports to various agencies like ROC, government, stock exchanges on the quarterly or annual basis.
- To provide information about how the company is utilizing various resources available at its disposal.
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What Constitutes Financial Reporting in Accounting?
As the name goes, financial reports typically constitute the overview of financial performance. Financial reports may be quarterly and annual or may be preliminary reports and prospectus in case of new starts ups.
Following are some key highlights:
#1 – Financial Statements
These include the balance sheet, profit and loss statement, cash flow statements. Some companies may have both standalone and consolidated financial statements if it is having two or more different units. These statements are purely the quantitative reflection of the performance of the organization.
#2 – Director’s Report
It provides an explanation of the financial statements. It provides information about operational performance and major highlights and achievements. During the bad performance period, it provides reasons for underperformance.
#3 – Management Discussion and Reporting
Management Discussion and Analysis provides information on the current position of the company vis-à-vis industry peers. One gets to know about industry trends. It also contains information about future strategies and opportunities.
#4 – Capital Structure
Informing stakeholders about the capital structure of the organization and changes therein if any.
#5 – Notes to Accounts
It incorporates methods and accounting policies company is using to record its transactions
#6 – Auditors Report
This provides the independent opinion of the statutory auditor about financials of the company as well as accounting policies used by the company.
#7 – Corporate Governance Report
It provides information on the composition of the board of directors and their profile. It also talks about remuneration paid to top management and compliance with other statutory requirements.
#8 – Prospectus
For a company going for IPO, the prospectus contains all the information about financials, operations, management, product mix, financial reporting for business goals of the organization.
#9 – Earnings Call
Earnings Calls are generally teleconferences where the financial performance of the company during a particular period is discussed with investors, financial reporting analyst.
In short, we can say that it creates an ecosystem of information which can be used by various stakeholders for multiple objectives of financial reporting in accounting. Good practices improve the efficiency of the markets as information is easily available to all the stakeholders.
This has been a guide to what is Financial Reporting in Accounting? Here we discuss the objectives of Financial reporting along with the constituents of Financial Reporting. You may learn more about Accounting from the following articles –