CORPORATE ACCOUNTING ASSIGNMENT-1

NAME- MANJRI BAIJAL

CLASS- BCOM 2-E
ENROLLMENT NO.-35929888823

UNIT-4 NOTES

CORPORATE FINANCIAL REPORTING

MEANING
Corporate financial reporting is the system of making corporate financial reports .These corporate
financial reports are income statement, balance sheet, cash flow statement ,statement of retained
earning and financial policies explanation .Corporate financial reporting is the system that builds the
economic reports of a company. A corporate financial report not only shows the financial statements of
a company but also aims to highlight the necessary financial data and furthermore shows the
application of financial policies.
NEED
• Transparency and Accountability: Corporate financial reporting ensures transparency
in the financial performance of the company, which helps to build the trust of the
stakeholders, including investors, creditors, employees, and the general public. It also
enables accountability by providing a means to assess the performance of the
management team.

• Decision–Making: Financial reporting provides information that helps decision-makers,

including investors and creditors, make informed decisions about investing in the
company. This information includes financial statements, footnotes, and other disclosures
that provide insight into the financial health and performance of the company.
• Regulatory Compliance: Companies are required to comply with various laws and
regulations related to financial reporting, such as the Companies Act, 2013 in India, and
the Securities and Exchange Commission (SEC) regulations in the United States.
Compliance with these regulations helps ensure that companies are operating within legal
guidelines and that the financial information provided is accurate and reliable.
• Internal Control: Financial reporting provides a mechanism for companies to establish
and maintain effective internal controls to ensure that financial information is accurate and
reliable. These controls help prevent fraud, errors, and misstatements in financial
reporting.
• Strategic Planning: Financial reporting provides management with the necessary
information to make strategic decisions, including capital investment decisions, expansion
plans, and financing decisions. The financial information provided through corporate
financial reporting enables management to assess the financial feasibility of various
strategic options.

OBJECTIVES
The objectives of corporate financial reporting can be broadly classified into two categories:
External objectives:

These objectives are aimed at providing relevant and reliable financial information to external
stakeholders to facilitate their decision-making. The external objectives of corporate financial
reporting are:

• To provide information about the financial performance of the company, including its
profitability, liquidity, and solvency.
• To provide information about the financial position of the company, including its assets,
liabilities, and equity.
• To provide information about the cash flows of the company, including its operating,
investing, and financing activities.
• To provide information about the risks and uncertainties facing the company, including its
exposure to market, credit, and operational risks.
• To provide information about the company’s governance and social responsibility
practices, including its compliance with applicable laws and regulations and its
commitment to sustainable development.

Internal objectives:

These objectives are aimed at improving the efficiency and effectiveness of the company’s
operations and management. The internal objectives of corporate financial reporting are:

• To provide information that can be used to evaluate the performance of different business
units, products, and services.
• To provide information that can be used to identify areas of inefficiency, waste, or
duplication in the company’s operations.
• To provide information that can be used to identify opportunities for cost reduction,
revenue enhancement, or process improvement.
• To provide information that can be used to monitor the implementation and effectiveness
of the company’s strategies, plans, and policies.
• To provide information that can be used to assess the performance of the company’s
management and employees.

CONSTITUENTS OF ANNUAL REPORT

The constituents of Annual Report include financial statements, brief history of the
company, purpose and values, chairman’s statement, Chief Executive Officer and
Managing Director’s Statement, Board of Directors, Business Model of the Company,
Board’s Report, Management Discussion and Analysis, Corporate Social Responsibility
Report, Business Responsibility Report, Corporate Governance Report, Secretarial Audit
Report, Economic Value Added, Statement containing salient features of financial
statements of subsidiaries/associate companies/joint-ventures, Corporate Information,
and Notice of Annual General Meeting.

ANNUAL REPORTS VS. FINANCIAL STATEMENTS

 • Annual reports are far more comprehensive than financial statements. As a result, annual
reports are regarded as more thorough than quarterly reports, even though their principal
goal is the same – presenting helpful information about the firm to all of its owners.
• The main goal of financial statements is to convey the company’s financial situation and
performance in simple language and statistics. As a result, they are often straightforward
to read, allowing shareholders and investors to grasp changes in the company’s financial
status quickly.
• On the other hand, annual reports are designed to give a larger picture of the
organisation that includes more than simply financial data. They generally talk about new
goods, new markets, emerging strategies, and the company’s overall future orientation. In
other words, yearly reports cover more than just financial information.

CONTENTS OF ANNUAL REPORTS

Most annual reports contain the following categories of information:

• General corporate information

• Operating and financial review
• Chairperson’s statement
• CEO’s report
• Auditor's report
• Corporate governance information
• Financial statements

MANDATORY AND VOLUNTARY DISCLOSURES THROUGH ANNUAL

REPORT
Mandatory disclosures refer to the information that companies are required to disclose by law.
These disclosures include:

• Financial statements: The annual report includes the company’s financial statements,
including the balance sheet, income statement, cash flow statement, and statement of
changes in equity.
• Auditor’s report: The auditor’s report is included in the annual report and provides an
opinion on whether the financial statements are presented fairly in all material respects.
• Corporate governance report: Listed companies are required to disclose their corporate
governance practices and provide a report on the same.
• Management discussion and analysis (MD&A): The MD&A is a section of the annual
report where management provides an analysis of the company’s financial performance,
operations, and future prospects.
• Directors’ report: The directors’ report is a mandatory disclosure that provides
information on the company’s operations, financial performance, and future outlook.

Voluntary disclosures, on the other hand, refer to information that companies choose to disclose
in addition to the mandatory disclosures. Some examples of voluntary disclosures include:

• Sustainability report: Companies may choose to disclose their sustainability practices

and initiatives in a separate sustainability report.
 • Corporate social responsibility (CSR) report: Similar to a sustainability report, the
CSR report provides information on the company’s social and environmental
initiatives.

• Financial highlights: Some companies may choose to include a section

highlighting their financial performance over the year.

• Analyst coverage: Companies may disclose the number of analysts covering their stock
and provide a summary of the analysts’ ratings and recommendations.
• Other relevant information: Companies may also choose to include any other relevant
information that they believe is important for their stakeholders to know, such as upcoming
projects, partnerships, or acquisitions.

CONTENTS OF THE REPORTS OF BOARD OF DIRECTORS

The contents of a director’s report requirements may vary depending on the company and the
needs of the jurisdiction in which the company operates. However, some of the typical contents
of a director’s report include:

1. Business Review: A summary of the company’s activities during the reporting period,
including significant events or developments.
2. Financial Review: A summary of the company’s financial performance during the
reporting period, including revenue, profit, and cash flow. This section may also discuss
the company’s financial position, liquidity, and capital resources.
3. Strategic Review: Discuss the company’s strategic objectives and progress towards
achieving them. This section may also include information about the company’s markets,
competitors, and other factors that may impact its prospects.
4. Governance Review: A discussion of the company’s corporate governance practices,
including its board structure, management practices, and policies related to ethics and
social responsibility.
5. Risk Review: An overview of the company’s risks, including those related to its
operations, finances, and reputation. This section may also discuss the company’s risk
management practices.
6. Future Outlook: Discuss the company’s prospects, including any plans for growth,
investments, or other strategic initiatives.
7. Other Disclosures: Other disclosures required by law or regulation, such as
environmental or social impact disclosures, may also be included in the director

XBRL FILLING
XBRL is a language for the communication of financial and business data electronically
used for business reporting around the world. XBRL means extensible Business Reporting
Language. The XBRL filing provides benefits in analysing , preparing, and communicating
business information.