Q:
What is the objective of Financial Reporting?
Answer
Financial Reporting involves the disclosure of financial information to the various stakeholders about the financial performance and financial position of the organization over a specified period of time. These stakeholders include – investors, creditors, public, debt providers, governments & government agencies.
Financial Reporting is very important and critical task of an organization. It is vital part of Corporate Governance.
The objectives & purposes of financial reporting :–
* Providing information to management of an organization which is used for the purpose of planning, analysis, benchmarking and decision making.
* Providing information to investors, promoters, debt provider and creditors which is used to enable them to male rational and prudent decisions regarding investment, credit etc.
* Providing information to shareholders & public at large in case of listed companies about various aspects of an organization.
* Providing information about the economic resources of an organization, claims to those resources (liabilities & owner’s equity) and how these resources and claims have undergone change over a period of time.
* Providing information as to how an organization is procuring & using various resources.
* Providing information to various stakeholders regarding performance management of an organization as to how diligently & ethically they are discharging their fiduciary duties & responsibilities.
* Providing information to the statutory auditors which in turn facilitates audit.
* Enhancing social welfare by looking into the interest of employees, trade union & Government.
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