Financial Statement Analysis and Reporting
Module 5
1. Corporate Reporting
Corporate reporting means reporting financial and non-financial data to stakeholders.
These reports can take many forms, depending on their goal, including audit reporting,
financial reporting, corporate governance and responsibility reporting, and more.
What are the parts of corporate reporting?
Audit reporting is part of corporate reporting, along with financial reporting,
corporate governance, corporate responsibility, integrated reporting, and others.
Corporate Governance: The processes by which companies are directed and
controlled.
2. Cash Flow Statement Analysis(AS3)
A cash flow analysis is the examination of the cash inflows and outflows of a business
to determine a company's working capital. It looks at a certain period of time for
different activities, including operations, investment, and financing.
A cash flow statement tracks the inflow and outflow of cash, providing insights into a
company's financial health and operational efficiency. The CFS measures how well a
company manages its cash position, meaning how well the company generates cash to
pay its debt obligations and fund its operating expenses.
What are the classification of cash flows?
ASC 230 identifies three classes of cash flows—investing, financing, and
operating—and requires a reporting entity to classify each discrete cash receipt and
cash payment (or identifiable sources or uses therein) in one of these three classes.
3. Statutory Reports
What Is Statutory Reporting?
What is statutory reporting and why is it so important?
Statutory reporting is the act of reporting financial information to a government
agency. For example, mandatory financial reporting to the Securities and Exchange
Commission (SEC) counts as statutory reporting.
Statutory reporting helps companies track and understand their financial performance.
This data helps companies evaluate their performance vis-a-vis peers, track progress
toward short-range and long-range goals, and improve corporate governance.
Internally, companies can evaluate the profitability of a new product or service,
understand their expenses and benchmark performance, whether cost-cutting or
scaling.
What Are Statutory Financial Statements?
Every industry has its own standard in terms of required information that counts as
statutory financial statements. When it comes to financial statements, the most
common documents are:
Income statement: This statement includes revenue, profit and loss, income
tax and business expenses.
Balance sheet: The balance sheet includes business assets, equity and
liability.
Notes to financial statements: A preamble to the financial statements that
explain methods used to calculate figures, assumptions made and relevant
financial policies.
Report of the statutory auditor: This is an audit verification statement
signed by a statutory auditor.
The most common types of statutory reports are: Financial statements: These include
the balance sheet, income statement, statement of changes in equity and statement of
cash flows. Tax returns: All businesses must submit tax returns to the relevant
authorities periodically.
Statutory reporting is the act of reporting financial information to a government
agency. For example, mandatory financial reporting to the Securities and Exchange
Commission (SEC) counts as statutory reporting. Statutory reporting helps companies
track and understand their financial performance.
4. Non Statutory Reports
‘Non-statutory financial statements’ are financial statements or other published
financial information that are not the company's statutory financial statements (e.g.
simplified accounting information such as an account in any form claiming to be a
balance sheet or profit and loss account relating to the financial year of a company or
group).
What is the difference between statutory and non statutory reports?
The key difference between a statutory and non statutory audit is that the former is a
legal requirement under the Companies Act 2006, and the latter is not. However,
whether statutory or not, audits cover the same ground including the examination of:
Balance sheet. Income statement.
What is the difference between statutory and non-statutory report?
Statutory refers to organizations and bodies that are defined by a formal law or a
statute. These bodies are entities shaped by an Act of Parliament and set up by the
Government to consider the data and make judgments in some area of activity.
Non-statutory is essentially another term for common law.
5. Integrated Reporting
Integrated Reporting brings together material information about an organisation's
strategy, governance, performance and prospects in a way that reflects the commercial,
social and environmental context within which it operates.
Integrated reporting has been created to enhance accountability, stewardship and trust,
as well as to harness the information flow and transparency of business that
technology has brought to the modern world.
6. Sustainability Reporting
Sustainability reporting has no set format, but broadly involves disclosure of a
company's environmental, social, and governance (ESG) goals and communicating
the company's progress and efforts to reach those goals.
What is the purpose of sustainability reporting?
Sustainability reporting creates numerous advantages, including the enhancement of
risk management strategies, the optimization of costs and savings, the streamlining of
decision-making processes, and the bolstering of corporate trustworthiness and
reputation.
There are several elements of sustainability reporting that you need to consider when
preparing a sustainability or ESG report. The 3 key elements that make up the ESG
acronym include: Environment, Social, and Governance, and these elements form the
framework of any sustainability report.
