Reporting Period

Updated on January 3, 2024
Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

Reporting Period Meaning

A reporting period is a month, quarter, or a year for which the financial statement of an organization is prepared for external use uniformly over some time so that the financial statements are comparable and understandable by the general public or the user of the financial statements.

Types of the Reporting Period

Reporting-Period

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A reporting period generally can be prepared for the following periods-

#1 – Monthly Reporting Period

For entities with a rapidly changing environment, preparing a control system that provides regular details of the financial results and financial position is necessary.

#2 – Quarterly Reporting Period

For industries having a seasonal nature, their market is generally for a specific quarter. Hence, once the quarter is over, it becomes necessary to evaluate the financial position and results. For such an industry, a quarterly financial statement is prepared to make the financial statementsFinancial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more more relevant and understandable to the users.

#3 – Yearly Reporting Period

Every industry prepares a yearly financial statement to know the financial results for the whole year and financial positions. Hence, all the companies prepare yearly or annual financial statements regardless of whether they prepare quarterly or monthly financial statements.

Yearly financial statements are prepared for the same period uniformly, from 1st April to 31st march or from 1st January to 31st December.

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Examples of Reporting Period

  1. A very famous company in New York called A ltd., listed on the New York stock exchange with an annual sales growth of $150,000,000, the board of directorsBoard Of DirectorsBoard of Directors (BOD) refers to a corporate body comprising a group of elected people who represent the interest of a company’s stockholders. The board forms the top layer of the hierarchy and focuses on ensuring that the company efficiently achieves its goals. read more had decided to issue financial statements having a monthly reporting period exclusively for its internal purposes. So, in this case, the company has a monthly reporting period.
  2. As per the Securities exchange commission(SEC), every company listed and publicly tradedPublicly TradedPublicly Traded Companies, also called Publicly Listed Companies, are the Companies which list their shares on the public stock exchange allowing the trading of shares to the common public. It means that anybody can sell or buy these companies’ shares from the open market.read more on any stock exchange is compulsorily required to issue a quarterly financial statement within the specified period, non-following of which may lead to huge penalties and fines. This is to ensure that the companies on whom the general public is dependent on generating their income should disclose their quarterly performance to the people to make their investment decisions wisely.
  3. As per IFRS 1, preparation of financial statements states that every company for which IFRS is compulsory must issue their general purpose financial statementsGeneral Purpose Financial StatementsGeneral-purpose financial statements are issued by the management at regular intervals. Such statements help investors and creditors interpret the business and company's financial condition to make informed investment decisions.read more with an annual reportingAnnual ReportingAn annual report is a document that a corporation publishes for its internal and external stakeholders to describe the company's performance, financial information, and disclosures related to its operations. Over time, these reports have become legal and regulatory requirements.read more period.

Advantages

The various advantages are as follows:

Disadvantages

Though it is useful in the ways mentioned above, there are certain disadvantages also. The various disadvantages are as follows:

  • It brings us a sort of rigidity to the financial statements since it is highly arbitrary. Still, the business has to use the reporting period as per IAS1 on an annual basis.
  • Few countries follow this as per the calendar year, from 1st January to 31st December, while others follow their reporting period starting from 1st April and ending on 31st. Hence the purpose of uniformity of reporting period breaks here.
  • For companies in some countries, this period is not the calendar year. Hence, even though financial statements are prepared for the reporting period, it doesn’t solve the purpose of finding the results for every calendar year. They need to re-compute their financial results.
  • If there is a change in the reporting period, there are cumbersome and tedious procedures, as mentioned in IFRS1, to be followed, which involve huge time, labor, and money, which doesn’t make much sense.

Important Points

Any of the following reasons must be fulfilled to change the reporting period.

  • For better preparation and presentation of financial statements;
  • Required by the specific statute or act;

Hence if any of the above reasons are fulfilled, along with its update in notes of the financial statements, specific reporting procedures, as mentioned in relevant IFRS, are to be followed to make the financial statements understandable.

Conclusion

Hence, it concludes that even though there are a few disadvantages, it becomes beneficial for the general public to have a common reporting period to give the financial statements of every entity comparable, useful, uniform, and understandable.

This article has been a guide to the Reporting Period and its meaning. Here we discuss types of reporting periods and examples, advantages, and disadvantages. You can learn more from the following accounting articles –

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