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.