What is the Quarterly Report?
Quarterly reports are the unaudited financial reports which are summarized versions of financial statements that is released by public companies every three months (quarter) to adhere to the compliance requirements.These reports help in the reduction of information asymmetry as well as in the reduction of the probability of any potential window dressing.
How Does it Work?
- These reports are filed with the securities and exchange commission.
- These usually are unaudited reports.
- Such figures may be utilized for comparative analysis.
- It can be utilized to assess the year-to-date performance of the company.
- As a compliance requirement, all public listed companies have to file the quarterly reports with the securities and exchange commission.
- For non-listed companies, the key stakeholders can request the release of such reports from the investor relations committee. Typically, the profit and loss statements are not readily available for public viewing.
- Usually, a stakeholder or an investor can access these reports from the securities and exchange commission.
- They are available as Form 10Q under the securities and exchange commission.
- Similarly, the annual reports are available as 10K reports.
- The investor or an analyst can, therefore, visit the electronic data gathering, analysis, and retrieval systems or the EDGAR of SEC to access the 10Q.
- They have to pass the name of the company in the search box of EDGAR.
Requirements
- The quarterly reports are to be filed as per clause 41 of the listing agreement.
- From the quarter-end and at the end of 45 days, the reports should be filed.
- The report should be composed of the current Quarter, comparable Quarter, and year-to-date figures.
- It should report total gross revenue, operational expenses, cash flow, and net profits.
Format of Quarterly Report
- It should cover a brief message from the board of directors to be shared with the stakeholders.
- They should highlight the performance of the Quarter ending financials.
- It should provide a balance sheet.
- It should provide an income statement and statement of cash flows.
Example of Quarterly Report
Let us take an example of the XYZ credit agency. The agency is planning to release its quarterly report for the First Quarter. It has asked its company secretary to prepare a draft of this report. All the financial details have been shared with the XYZ credit agency. Help the company secretary to prepare this report.
Message from the board,
The board of directors has approved the release of unaudited financial statements for the Quarter ending 31/03/2019. The board feels happy to share financials with positive numbers with the stakeholders. The board has taken up additional strategic initiatives that would further help in improving the financial conditions of the business.
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For Quarter ending 1, the balance sheet is as follows: –
Impact
- As per the compliance requirements of federal securities laws, the publicly traded entities have to release financial information on an annual basis and quarterly basis.
- Such disclosures help in driving transparency among different stakeholders.
- A thorough and comprehensive prepared financial statements drive accountability and hence helps the financial markets to operate efficiently.
- The release of such information at periodic intervals helps in curbing information asymmetry and insider trading.
- The release of such reports helps prospective investors to decide whether they should invest in such business or not.
- Since these reports are to be prepared in line with the compliance requirements of the federal laws, such reports are standardized and easy for the layman to understand them.
- As a compliance requirement, the quarterly reports are to be filed within 45 days with each quarter-end.
- It ensures that stakeholders have prompt access to crucial information, and they can easily drive critical decision making for themselves.
- It ensures the reduction in volatility that comes into the picture of price-sensitive entities.
- Such practices enhance investor confidence and reduce the competitive disadvantages that exist between different markets.
Difference Between Quarterly Report and Annual Report
- The annual reports are reports that the business has to release to its shareholders on an annual basis.
- The quarterly reports are released quarterly.
- The annual reports would consist of auditor opinion, management discussion analysis, and the financial statements for the current financial year.
- The quarterly reports may be composed of the only year’s financial statements and quarter financials, which are generally unaudited. They do not have any auditor opinion or management discussion analysis.
- The annual reports are normally filed as 10K in the SEC, whereas quarterly reports are available as 10Q.
- The deadline to file annual reports is within 60 days, whereas, for interim financials, the deadline is slated as 45 days for making a submission.
Advantages
- It reduces information asymmetry
- It boosts investor confidence and hence helps in bringing additional investments for the business.
- It helps prepare trailing twelve months, which is determined by employing two comparable quarterly statements and one recent annual financial statement.
- It reduces any scope of window dressing in the financials, which is hard to annual reports. Window dressing is the process of making year-end financial statements attractive so that new investors could be attracted to the business.
- Since window dressing and information asymmetry are reduced, this results in the display of transparent financial statements.
Disadvantages
- Any activity that is mentioned on the quarterly reports but absent on the annual reports can impact the growth prospects of the business.
- Since these statements are not audited, they may not be easily understood to the layman.
- It is difficult to prepare these reports that are in line with the performance objectives of the company consistently.
- These reports are generally not standardized as compared with the annual reports.
Conclusion
The quarterly reports are unaudited financial statements released at every quarter-end. These reports are fairly different from annual reports. Such reports help in releasing information that helps in the promotion of investor confidence in the business. Any stakeholder who is keen to access these reports can download the reports from the SEC as the quarterly reports are available as 10Q under the EDGAR section of the SEC.
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