Quarterly Preparation of Financial Statements and Reports: the Most Appropriate Interval of Reporting
Quarterly preparation of financial statements and reports: the most appropriate interval of reporting
What are businesses made for? Basically, businesses are made to earn profits by providing high quality goods and services to the consumers like the public. Different operations are carried out by these entities just to obtain their desired level of income and to establish a good reputation in the industry where they belong. Their earned income and incurred expenses for a certain period are summarized in the form of financial reports and statements that provide systematic information about the financial affairs of a business or institution to be used in decision making and strategy formulation by its owners and other users. But what is the appropriate interval of preparing these financial reports and statements? Is it daily, quarterly, or annually? To answer these questions, three criteria are set which include (1) relevance, (2) comparability, and (3) regulatory compliance.
First criterion is relevance. Financial statements must provide information that is relevant to the decision- making need of users. Undue delay in the reporting of information may lose its relevance, thus reporting must be on a continuous basis. If financial reports and statements are prepared daily, more data can be obtained and can be useful in decision making but having more data don’t necessarily imply more valuable information. In fact, there is a great possibility that the individuals and the system will be overrun with data may only result to meaningless financial reports. In contrast, preparing financial statements quarterly can help the company in analysing the seasonality regarding trends which will be of great help in making future plans and actions. While annual reports can provide visual information such as charts, graphs, and, others, there is still a great chance of obtaining old information that will no longer be relevant for the company.
Comparability is the second
What are businesses made for? Basically, businesses are made to earn profits by providing high quality goods and services to the consumers like the public. Different operations are carried out by these entities just to obtain their desired level of income and to establish a good reputation in the industry where they belong. Their earned income and incurred expenses for a certain period are summarized in the form of financial reports and statements that provide systematic information about the financial affairs of a business or institution to be used in decision making and strategy formulation by its owners and other users. But what is the appropriate interval of preparing these financial reports and statements? Is it daily, quarterly, or annually? To answer these questions, three criteria are set which include (1) relevance, (2) comparability, and (3) regulatory compliance.
First criterion is relevance. Financial statements must provide information that is relevant to the decision- making need of users. Undue delay in the reporting of information may lose its relevance, thus reporting must be on a continuous basis. If financial reports and statements are prepared daily, more data can be obtained and can be useful in decision making but having more data don’t necessarily imply more valuable information. In fact, there is a great possibility that the individuals and the system will be overrun with data may only result to meaningless financial reports. In contrast, preparing financial statements quarterly can help the company in analysing the seasonality regarding trends which will be of great help in making future plans and actions. While annual reports can provide visual information such as charts, graphs, and, others, there is still a great chance of obtaining old information that will no longer be relevant for the company.
Comparability is the second