What Are The Different Types Of Financial Reporting?
Financial reporting is a systematic process of recording and representing an organisation’s financial data. Different types of financial statements convey the business activities and the financial performance of the organisation over a given period and to multiple audiences. For example: Financial reporting for management and leadership teams Management teams rely on different types of financial reporting to inform their decision-making on different aspects of running the business. These are often referred to as CFO reports. They are normally intended for internal use, such as planning for future goals or updating management with clear and concise financial trends. However, they are also used by external entities, such as lenders and investors, who may need insight into the company’s financial status. Financial and management reporting excellence varies from sector to sector, but there are some common themes every CFO should be presenting.
External investors and stakeholders
Investors, financial analysts, shareholders, lenders and other stakeholders use financial statements to evaluate a company’s financial health, assess performance over time, and form expectations about future profitability, cash flows, risk and—where relevant—share price performance.
While all investor types pay close attention to a company’s results and financial position, private equity investors often place additional emphasis on areas such as working capital, debt and covenant headroom, cash conversion, recurring vs non-recurring items, and the quality and sustainability of earnings.
Auditors
Financial statements are often audited (or otherwise independently reviewed) to provide assurance that they present a true and fair view and are prepared in line with the relevant accounting standards. This can be important for statutory compliance, tax reporting, securing finance, supporting investment decisions, and building stakeholder confidence in the reported numbers.
What are the different types of financial reporting statements?
Financial reporting is broader than the primary financial statements alone. It can also include supporting disclosures and reports such as notes to the accounts, the directors’ report, the auditors’ report, and corporate governance reporting (where applicable). These components add context, explain accounting policies and key judgements, and provide detail that helps users interpret the headline figures.
One of the most important sources of reliable, consistent and often audited financial information is a company’s annual report. Annual reports typically bring together the primary financial statements with narrative commentary from leadership—often including an overview of performance, key risks and uncertainties, and management’s outlook—helping readers understand not just what happened in the numbers, but why it happened and what it may mean going forward.
What are the most common financial statements?
The most common financial statements are the balance sheet, income statement, cash flow statement and equity change statement.
The balance sheet
This provides an overview of assets, liabilities, and shareholders' equity as a snapshot in time.
The income statement
This primarily focuses on a company’s revenues and expenses during a particular period. Once expenses are subtracted from revenues, the statement produces a company's profit figure called net income.
The cash flow statement (CFS)
This measures how well a company generates cash to pay its debt obligations, fund its operating expenses, and fund investments.
The statement of changes in equity
This records how profits are retained within a company for future growth or distributed to external parties.
Consolidated financial statements
Group companies will normally also have to produce consolidated financial statements. These represent the total of the parent company and all subsidiaries that are controlled by the parent company. They include the key financial statements, such as the income statement, cash flow statement, and balance sheet.
