Financial reporting is integral to corporate governance and effective stakeholder communication. Explain the key importance of financial reporting for an organization, focusing on its role for various stakeholders. Furth

Importance of Financial Reporting: The importance of financial reporting cannot be over emphasized. It is required by each and every stakeholder for multiple reasons and purposes. The following points highlight the importance of financial reporting - It helps organisations to comply with various statutes and regulatory requirements. The organisations are required to file financial statements to the ROC, Income tax authorities and other Government Agencies. In case of listed companies, quarterly as well as annual results are required to be filed to stock exchanges and published. It facilitates statutory audit. The statutory auditors are required to audit the financial statements of an organisation to express their opinion. Financial Reports form the backbone of financial planning, analysis, bench marking and decision making. The reports are used for above purposes by various stakeholders. Financial reporting helps organisations to raise capital both domestic as well as overseas. On the basis of financials, the public at large can analyse the performance of the organisation as well as of its management. For the purpose of bidding for tenders, labour contracts, government supplies etc., organisations are required to furnish their financial reports & statements. Financial reporting also facilitates an introspection of the organization. It takes stock of various affairs which would have been missed in the absence of any financial system. Limitations of Financial Reporting: The current financial reporting model was developed in the 1930's for an industrial world. In general, the model provides a backwards-looking review of performance and does not provide enough relevant information for decision-making today. The financial reporting model is like "looking in the rear-view mirror," when in fact the road ahead is very turbulent and there are huge impacts on the company, both societal and environmental. It is not necessarily the volume of information, but the lack of a comprehensive story, which is where improvements in corporate reporting are needed. Investors expect information about: Business model and strategy, Intangible factors and sustainability (i.e. economic, environmental, social) commitments, Impacts and performance that affect a company's value today and its ability to create value in the future, Key aspects of corporate governance, Internal controls, Human rights / diversity practices and policies, Key financial ratios.