Elucidate the purposes and limitations of Financial Reporting.

Financial reporting is the process of producing statements that disclose an organisation's financial status to management, investors and the government. Financial Reporting involves the disclosure of financial information to the various stakeholders about the financial performance and financial position of the organisation over a specified period of time. These stakeholders include - investors, creditors, public, debt providers, governments & government agencies. In case of listed companies the frequency of financial reporting is quarterly & annual. Purposes of Financial Reporting: Financial reporting serves two primary purposes. First, it helps management to engage in effective decision-making concerning the company's objectives and overall strategies. The data disclosed in the reports can help management discern the strengths and weaknesses of the company, as well as its overall financial health. Second, financial reporting provides vital information about the financial health and activities of the company to its stakeholders including its shareholders, potential investors, consumers, and government regulators. It's a means of ensuring that the company is being run appropriately. Limitations of Financial Reporting: The importance of financial reporting cannot be over emphasised. But still financial reporting has some limitations. 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 financial 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.