Corporate Reporting

Introduction

The Primary function of accounting is to accumulate and communicate information essential to an understanding of the activities of an enterprises, whether large or small, corporate or non-corporate, profit or non-profit, public or private.

Meaning

The exact definition of corporate reporting differs depending on who you speak to. However, throughout this web site we use the term ‘corporate reporting’ to refer to the presentation and disclosure aspects ― as distinct from accounting/measurement

Features of Corporate Reporting

1. Credible2. Relevant3. Authentic4. Engaging5. Digestible

2-Relevant

The task of prioritizing social and environmental issues for strategic planning and reporting purposes can be daunting for any company. The key is to identify and illustrate issues that are highly material – those that have the greatest potential to impact the company’s long-term success and that matter to its most relevant stakeholders.

3-Authentic

Although “authenticity” has become a business buzzword, it’s often an afterthought in the CR reporting world. Reports that lack authenticity miss a valuable opportunity to build a connection with stakeholders. One way to test the authenticity of your reporting is to ask a range of employees at various levels and from various departments within your company to review draft content.

4-Engaging

Over the last five years many companies have made the jump from print to online reporting formats (or a hybrid of the two), and some have gone a step further. We’re thrilled to see companies aren’t just focusing on what is presented but how it’s presented, with improved design and functionality.

5-Digestible

One of the most challenging aspects of CR reporting is the balancing act between being thorough and concise. Companies with good intentions that aim for a high level of transparency sometimes over share and lose their audiences in the weeds.

Objectives of Corporate Reporting• Giving information primarily for those to specific users.• Giving information about the performance of the company.• Giving information about the difficulties faced by the company• Information about sources and applications of funds during the year.• information about the products of the company• Information about the loan taken & loan give.• Information about the research and development undertaken during

the year and the progress made thereof• Information about the capital project..• Information about employees management relations.• Information about the economics scene and its effect on the

performance.

Users of Accounting Information

External Users of Accounting Information

a) Investors b) Creditors c) Member of Non-Profit organization d) Government e) Consumers f) Research Scholars

Internal Users of Accounting Information

a)Owners b)Management c) Employees

Statutory Reporting and Non-Statutory Reporting

Statutory Reporting Statutory reporting is that which

is to be done as per provisions of the law. The companies act make it compulsory for the board of directors to lay before the company’s annual general meeting a copy of the statement of Profit and loss, Balance sheet together with the direct ors and auditors Reports.

Non-statutory

Non-Statutory Reporting may not be required legally but a company may be voluntarily reporting to shareholders on some matters which may be important to them and other members of the public.

Deductive & Inductive Approach in Reporting

Deductive Approach This approach starts with

objectives of reporting and from these objectives logical principles are derived that provide the basis for reporting. In this approach, determination of objectives is most important because different objectives need entirely different structures and result in different methods.

Inductive Approach This approach is a positive and

realistic approach. In this approach detailed observations are made for few items and on the basis of detailed observations generalizations are made and principles are framed. This approach makes an attempt to state what financial information is collected, analyzed and communicated.

Directors Report

Director’s report is written by the directors of a company and forms the part of company’s financial statement. The report gives the details of company’s state and its compliance with a statement of financial, accounting and corporate social responsibility standards.

Need of Directors Report

The need for director’s report arose out of the general move for greater transparency in corporate governance. It is useful for shareholders to find out issues such as whether the company has good finances whether the market has potential, and whether the company has the structure capacity to expand into new opportunities.

Directors Report- disclosure Requirements Under the Companies Act, 2013

Every year directors of a company have to prepare a report for the company’s members to explain what the company has been doing and its plans for the future the report is typically prepared on a quarterly and annual basis. It includes detailed items such as the accountant’s financial analysis and management recommendations the report is usually unedited. A statement by a company’s director in its annual accounts giving the director’s opinion of the state of the company, and how much should be paid to people owning shares in the company.

Disclosures in the Board’s Report

Information required to be given the Board’s report

• State of affairs of the company• Amounts, if any, they proposed to carry to reserves in the

Balance sheet.• The amount, if any, which they recommend should be

paid by way of dividend.• Material changes and commitments, if, any affecting the

financial position of the company which have incurred between the end of financial year and the date of report.

Changes to be mentioned in the Board’s report

• Changes in the class of business in which the company has an interest.• Changes in the nature of the company’s business• Changes in the company’s subsidiaries or in the nature of

business carried by them.

Director’s Responsibilities statement

• That in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures.• That the directors had taken proper and sufficient care

for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detention fraud and other irregularities• That the directors had prepared the annual accounts on

a going concern basis.

Corporate Social Responsibility Every company having net worth rupees five hundred crores or

more, or turnover of rupees one thousand crore or more a net profit of rupees five crore or more during any financial year shall constitute a corporate social reasonability committee of the Board Consisting of three or more directors, out of which at least one director shall be an independent director. This committee shall monitor the corporate social responsibility Policy of the company from time to time. The Board of every company shall ensure that the company spends in every financial year, at least two per cent, of the average net profits of the comp-any made during the three immediately proceeding financial years, in pursuance of its corporate social responsibility policy.

Corporate Social Responsibility

1. Corporate governance2. Director’s responsibility statement as required U/S 154 of companies Act, 2013.

Auditor’s Report

The auditor’s report is a formal opinion or disclaimer thereof, issue either by an internal auditor or external auditor after the conduct of internal or external audit. The Internal audit is an independent.

Types of Audit Report

1.Unqualified opinion2.Qualified opinion3. Adverse opinion4. Disclaimer of opinion

Current Practices of corporate Reporting

Accounting is the language employed for communicating financial information of a concern to various who are interested in such information. Communication of financial information and other information by published accounts serves its purpose only if it satisfies the needs of persons well-versed in accounting language on the one hand layman not familiar with accounting techniques on the other. Keeping in view the complicacies of statuary forms as prescribed in the companies Act, now-a-a days it is a common practice to add to the statement of profit and loss and the balance sheet drawn in statutory forms, some voluntary supplementary information in a simple manner as would be easily understood by a layman.

Current Practices of Corporate Reporting

• This voluntary information may include the following:• Presentation of the highlight of the information contained in the published accounts.• Preparing cash flow statement• Preparing fund flow statement• Provision of important accounting ratios• Discloser of accounting policies• Use of charts, graphs and diagrams• Use of schedules• Impact of price level accounting• Rounding-off of figures• Segmental reporting• Social accounting• Human resource of accounting• Corporate governance report

A-Summarized Statement of profit and Loss and balance Sheet

Summarized Statement of profit and Loss and balance Sheet

Summarized Statement of profit and Loss and balance Sheet

B-Highlights

Highlights are usually shown at the beginning of the annual report so that the reader may come across the important facts of the company immediately as he opens thereof.

C-Cash Flow Statement

An enterprise should disclose together with a commentary by the management, the amount of significant cash and cash equivalent balances held by the enterprise that are not available for use by it. Information about the cash flows of an enterprise is useful in providing users of financial statements with a basis of assess the ability of the enterprise to generate cash and cash equivalent and the needs of the enterprise to utile those cash flows.

D-Funds Flow Statement

The funds statement is becoming popular day by day because it explains why in spite of huge profits earned by the company, it is facing difficulty in making the payment to creditors in time.

E-Provision of Important Ratios

1. Current ratio i.e. Current Assets Current liabilities

2. Liquid ratio i.e. Current Assets-Inventory Current Liabilities

3. Percentage of current assists to Total Assets i.e. Current AssestsX100 Total Assets 4. Ratio of shareholders Fund to Fixed Assets i.e. Shareholders Fund Fixed Assets

4. Dividend per share

5. Earning per share i.e. Net Profit No. of shares

F-Disclosure of Accounting Policies

Now a days progressive companies also disclose accounting policies in their published accounts on the basis of which they have prepared their financial statements. This is done with a view to giving better understanding of the financial statements to the public.

G-Use of Charts, graphs and diagrams

H-Use of Schedules

Now a days efforts are made to make the balance sheet and profit and loss account as compact as possible.

I-Impact of Price level changes

Prices do not remain constant; they go on changing every day.

J-Rounding Off of figures

The Sachar Committee has recommend that companies should be given the option to round off the figures in the balance sheet to the nearest thousand or hundred or ten rupees.

K-Segmental Reporting

Recent trend is to make available to the users of financial statements regimental information based on geographical and business segments for assessing the prospects and risks of a diversified enterprises.

L-Social Accounting

The main emphasis for evaluation of a

business unit was on commercial aspects the social aspect has so far been ignored.

Human Resource of Accounting

It is known fact that success of an organization depends on the quality, caliber and character of the people working in it.

Corporate Governance Report

It is a system by which companies are directed and controlled. Everyone who is a part of the system is contributing to corporate governance.

Interim Financial Reporting

In addition to financial reporting at the end of the accounting year covering a period of one year, there can be interim financial reporting covering a period of less than a year.

Following Components is:-a) Condensed balance sheetb) Condensed statement of profit or lossc) Condensed cash flow statementd) Selected explanatory notes

Harmonization of Corporate Reports

With the expansion of international trade and functioning of international capital market, business has become global. This has necessitated the communication across the borders. Now days corporate reports are not used solely within the boundaries of single country alone.

Advantages of Harmonization of Corporate Reports

1. Corporate reports based on different accounting practices of different countries will not meet the requirements of investors in more sophisticated countries.

2. The need for harmonization of corporate reports is felt when funds from overseas markets are required.

3. Removal of trade barriers and technological advancement has led to the expansion of international trade.

4. Uniform corporate reports facilitate comparison and help in taking rational decisions because corporate reports in different countries.

5. Harmonization of corporate reports will reduce the cost of preparation of a report in case of multinational companies because same principles will be followed for units set up in different countries.

6. Uniforms corporate reports will facilitate merger of companies because financial statements forming part of corporate reports of different entities will be based on same principles.

Conclusion

Outdoor Equipment Ltd is not in a very secure financial position. Improvements in every area of the company are needed if the company is, in the first instance, to survive and then grow. The key areas of reform are the liquidity of the company and the quantity and quality of working capital, profitability, and financial stability. Management must address these areas simultaneously if the company is to overcome its present poor record.