Financial Reporting is an important component of accounting of an organization. It consists of 1) Financial Statements, and 2) Notes to the Financial Statements. According to International Accounting Standard Board (IASB), the objective of financial reporting is “to provide financial information about the reporting entity’s assets, liabilities, equity, income and expenses that is useful to users of financial statements in assessing the prospects for future net cash inflows to the reporting entity and in assessing management’s stewardship of the entity’s economic resources.”
The following information is provided in the financial statements.
- Statement of financial position, recognizes assets, liabilities and equity.
- Statement of financial performance recognizes income and expenses.
- Other Statements and notes, presents and disclose information about:
Importance of Financial Reporting
The importance of financial reporting is required by each and every stakeholder for multiple reasons & purposes.
- It facilitates organization to meet the regulatory requirements.
- It facilitates for external audit.
- It facilitates in the financial planning of the organization.
- It facilitates to analyse the financial performance of the organization.