What Is a Corporation Financial Report?

Mark Wollacott

A corporation financial report is a record of a company’s financial activities during a financial year. Such financial reports are also called financial statements and, in the U.K., an account. Typical corporation financial reports include four types of financial statement plus analysis and discussion.

A corporation financial report includes detailed information about a business's finances.
A corporation financial report includes detailed information about a business's finances.

The first financial statement is the statement of financial position or balance sheet. This is a snapshot of the business’ finances. It includes current assets such as cash and prepaid expenses and fixed assets such as property, intangible assets and investments. The layout of a public corporation’s balance sheet is determined by the International Accounting Standards Board. It is the only corporation financial report that is presented at one fixed point in time.

Corporations also release statements of comprehensive income. These cover any period of time the company sees fit, including yearly and quarterly reports. These statements are also called profit and loss statements. They report the company’s income and expenses plus any profits or losses.

Statements of changes in equity are used to explain changes in a corporation’s equity during a specific period of time. The statement contains the total comprehensive income and reconciliations between the amount of equity carried at the beginning and at the end of the period. The reconciliations section includes profits, losses and transactions.

The final statement in a corporation financial report concerns cash flow. This is also known as a statement of cash flows or a funds flow statement. The cash flow statement demonstrates how balance sheet changes affect a company’s cash and cash equivalents. Assets that can be quickly converted into cash, such as government bonds, are called cash equivalents.

Footnotes within the corporation financial report contain a wealth of information. First, they reveal the company’s accounting practices. Second, they provide detailed information on the company’s tax details. Third, they show the company’s pension and retirement plans. Fourth, they contain notes regarding the company’s stock options.

The corporation financial report is designed to be readable for individuals with a basic understanding of business and economics. They are used by investors to gauge a business’ potential, by owners to make business decisions, by tax authorities to ascertain tax accuracy and by financial institutions such as banks to decide if they should provide working capital. Employees also use financial reports to make collective bargaining agreements.

Financial report accuracy is determined by audits. An audit is the thorough examination of the company’s finances, stock and practices. Audits are done through independent auditing companies. The results of the audit are provided in an audit report, which can then be compared against the corporation’s financial report.

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