What is financial reporting?

Financial reporting is fundamentally about the disclosure of financial information to stakeholders, including investors, creditors, management, and regulatory agencies. This process involves the preparation of financial statements, such as the balance sheet, income statement, and cash flow statement, which provide a comprehensive view of a company's financial performance and position over a specific period of time. By reporting this information, organizations enable stakeholders to make informed decisions regarding their involvement with the entity, such as investing, lending, or managing resources.

The focus of financial reporting is on transparency and accountability, thereby offering insights that stakeholders need for assessing the health and sustainability of the business. It encompasses not just the financial results but also how these results align with overall business strategies and objectives, fostering trust and facilitating economic activities.