Corporate Financial Reporting:
Financial Reporting is the communication of financial information or an enterprise to the external world. Bedford conceptualizes the financial reporting process as consisting of four procedural steps:
Corporate financial reporting is a series of activities that allows companies to record operating data and report accurate accounting statements at the end of each month, quarter and year, Bookkeepers record operating data by debiting and crediting financial accounts. BMS can help you by keeping your books of accounts accurate on regular basis. BMS can prepare financial statements in accordance with corporate policies, Industry practices and regulatory guidelines.
Objectives of Corporate Financial Reporting:
Corporate financing reporting is not an end in itself but is a means to certain objectives. There are debates regarding objective of financial reporting. However, some consensus has been developed on the objectives of financial reporting through the Issuance of the conceptual framework. The conceptual framework provides the conceptual basis (or generally accepted accounting principles (GAAP). It outlines the characteristics accounting information must possess to be useful in investment and other economic decisions. Like other standard setting bodies, paragraph 22 of the Framework states that the objective of financial statements is to provide information about financial position, performance and cash flows of an enterprise that is useful to a wide range of users in making economic decisions. The Framework specifies present and potential Investors, employees, lenders, suppliers and other trade creditors, customers, governments and their agencies and the pubic as the users of financial statements.
In USA, the FASB has identified the following major objectives of financial reporting:
(I) Financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit, and similar decisions.
(ii) Financial reporting should provide information to help investors, creditors, and others to assess the amount, timing and uncertainly of prospective net cash inflows to the related enterprise.
(iii) Financial reporting should provide information about the economic resources of an enterprise, the claims to those resources (obligations of the enterprise to transfer resources to other entities and owners equity), and the effects of transactions, events and circumstances that change resources and claims to those resources.
(iv) Financial reporting should provide information about an enterprise’s financial performance during a period.
(v) The primary focus of financial reporting is information about an enterprise’s performance provided by measures of earnings and its components.
(vi) Financial reporting should provide information about how an enterprise obtains and spends cash, about its borrowing and repayment of borrowing, about its capital transactions, including cash dividends and other distributions of enterprise’s resources to owners, and about other facts that may affect an enterprise’s liquidity or solvency.
(vii) Financial reporting should provide information about how management of an enterprise has discharged its stewardship responsibility to owners (stockholders) for the use of enterprise resources entrusted to it.
(viii) Financial reporting should provide information that is useful to managers and directors in making decisions in the interest of owners.
Apart from investment decision making another objective of financial reporting is to provide information on management accountability. Management accountability is a broad concept that encompasses stewardship. The accountability relationship may be created by a constitution, a law, a contract an organization make, a custom or even by informal moral obligation. It is considered that management of an enterprise is periodically accountable to the owners not only for safekeeping of resources but also for their efficient and profitable use. Management accountability objective mainly emphasizes reliability aspect of accounting information. Accordingly, compared to relevance, verifiability through adequate documents, records and system is considered dominant consideration for inclusion or any piece of information in the financial statement.
Corporate financial reporting being user oriented and users’ need of information being not same, the role of accounting and financial reporting may vary from country to country. But, financial reporting is central to the process of allocating financial resources in capital markets, Hence, primary purpose of providing useful information to all users, which help them in decision making, is common in all countries.
At BMS Auditing, we can assist you in preparation of your financial statements maintaining your books of accounts in accordance with professional standards. The financial statements produced can be a useful tool for management for making financial decisions. We are determined in providing highly sophisticated and specialized standards and ethical practices that guarantee your satisfaction. For us, financial reporting is not merely a routine preparation. We rely on our extensive, rich knowledge in designing and analyzing customized reports that are tailored to suit your specifications.