IN THIS CHAPTER
Reviewing the purposes of financial reports
Keeping up-to-date on accounting and financial reporting standards
Ensuring that disclosure is adequate
Nudging the numbers to make profit and solvency look better
Comparing financial reports of public and private companies
Dealing with information overload in financial reports
Financial statements are the core content of a financial report, to be sure. But the term financial report connotes more content than the basic set of financial statements. To start this chapter, I briefly review the three primary business financial statements. Then I move on to a broader view of what’s in a financial report.
Lest you think that accountants prepare the whole of a financial report, I explain the role of top management in preparing the financial report of a business. Accountants are the main actors in whipping together the financial statements of the business. That’s their job. Then the top-level managers of the business take over. The managers are the primary actors in deciding the additional content to put in the financial report, from the letter to the shareholders to a historical summary of the key financial data of the business.
I also call your attention to the seamy side of financial reporting. The company’s managers may put a spin on the financial statement numbers generated by the accountant. Managers may override the accountant’s numbers to make profit look better ...