Definition:
Financial reporting refers to the communication of financial information, like financial statements, to the financial statement users, like investors and creditors. Financial reporting is typically viewed as companies issuing financial statements. A general purpose set of financial statements include a balance sheet, income statement, statement of owner’s equity, and statement of cash flows, but financial reporting is much more broad than just as set of financial statements.
What Does Financial Reporting Mean?
Financial reporting includes all financial communication from the business to outside users including press releases, shareholder minutes, management letters and analysis, auditor reports, and even the notes of the financial statements. Basically, anything that can convey financial information to the public is considered financial reporting of some kind.
Example
One of the most common forms for financial reporting, other than financial statements, is management’s discussion and analysis or MD&A. This is a report issued by management that discusses not only the current financial position of the company, but it also speculates on future performance and possible market opportunities. Management can also discuss debt arrangements as well as the liquidity and capital resource position of the company.
MD&A is a great way for investors and creditors to get additional information about the company to predict how well it will perform in the future. Financial statements along with MD&A and the other publicly available financial reports listed above, should give potential investors and creditors enough information to make their financial decisions about the company. Publicly traded companies are not only requited to make these report available to the public, they must also issue these reports to the regulator agencies.
