RM-Topic 1-Financial Report

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Segment: Financial Reporting

Topic: Financial Report


Financial Report

Table of Contents

1. Components .................................................................................................................................... 4
2. Summary ......................................................................................................................................... 6

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Financial Report

Introduction

The financial report is a comprehensive document that includes a great deal of information
about the company and its financial performance during a period. Not all businesses are legally
required to produce a financial report. Regulators in each country decide on

 the type of businesses that are required to produce a financial report

 how often a business is to produce a financial report per year.

In some countries, companies are required to produce an annual report as well as quarterly
reports. In other countries, companies are required to produce an annual report as well as a
biannual report. Typically, periodic reports are not as detailed and comprehensive as annual
reports.

Regulators also set deadlines for companies to produce their financial reports. Companies
generally produce their annual reports within four to six weeks after the end of the financial
period. However, many companies announce their profit figures for the period within two to
three weeks after the end of the financial period.

Learning Objectives
At the end of this topic, you will be able to:
 state the purpose of the financial report

 describe the eight components in the financial report.

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©COPYRIGHT 2019, ALL RIGHTS RESERVED. MANIPAL ACADEMY OF HIGHER EDUCATION
Financial Report

1. Components
The amount of information disclosed in a financial report has increased significantly in recent
years. This increase has, for the most part, been influenced by greater demand for transparency
by many users. In addition, many companies tend to disclose other relevant information
voluntarily when it is in their best interest to do so.

Fig.1: Components of a Financial Report


Typically, a financial report includes the following sections:

Corporate review information

This section tends to provide information about the business activities of the company, its
overall performance, and its prospects. It may also include a review of the company strategy,
human resources policy and how the company is responding or contributing to public safety
and community welfare. The impact of unusual or external events, and how the company is
responding to changes in market conditions, can also be included.

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©COPYRIGHT 2019, ALL RIGHTS RESERVED. MANIPAL ACADEMY OF HIGHER EDUCATION
Financial Report

Operations review information

This section provides qualitative and quantitative information about the activities of the various
segments, products and services of the company. Large or multinational companies also provide
such details on a geographical basis.

Financial review information

The financial review section provides narrative discussion and analysis of the financial position
of the company at the end of the reporting period, and of its financial performance.

Financial statements

The financial statements provide summary information about a company's financial position,
profitability and cash-generating ability.

Notes to the financial statements

The footnotes to the financial statements are an integral part of the financial statements. They
provide information about the accounting policies, methods and procedures used by a company
in the preparation of its financial statements.

External auditor's report

The auditor's report provides the users of financial statements with a reasonable assurance that
the financial statements are prepared in accordance with generally accepted accounting
principles, are fairly presented, and are free from material misstatement.

Selected unaudited financial data

The provision of this data tends to vary in nature and in depth across companies. For example,
oil and gas companies may provide information about reserves, such as quantity, value and
sources, in reserve quantity and value figures. Quarterly financial information is another
example.

Stock market data

Most listed companies provide summary information about share price fluctuation during the
reporting period, dividends declared, and brokers details.

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©COPYRIGHT 2019, ALL RIGHTS RESERVED. MANIPAL ACADEMY OF HIGHER EDUCATION
Financial Report

For an example of a financial report, visit the General Electric website (https://www.ge.com/)
and follow the steps below:

A. Go to Investors

B. Select the latest annual report

C. Click on the “Download 2019 10-K”

2. Summary
Here is a quick recap of what we have learnt so far:

 The financial report provides information about the performance of the company during a
period, and its financial position and cash generating ability.
 The aim of the financial report is to help users make informed decisions about the company.
 The production of the financial report relies on generally accepted accounting principles.

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©COPYRIGHT 2019, ALL RIGHTS RESERVED. MANIPAL ACADEMY OF HIGHER EDUCATION

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