Introduction To Corporate Financial Reporting – CMA Final – ICMAI

Introduction To Corporate Financial Reporting
Introduction To Corporate Financial Reporting


Paper 17 – CMA Final – ICMAI



Finance is the lifeblood of business. This is a well-known quote that everyone is aware of. Finance becomes an unprecedented factor, without which no economic activity can be carried on. In that case, what is Financial Reporting? What does it aim at? What does it consist of? These would be our basic questions.


Let’s understand it from a very simple language. If Finance is the lifeblood of business, Financial Reporting is nothing but a blood test report. It just reveals the financial health and hazard of the enterprise. Financial Reporting aims to provide information about the financial position, performance, and changes in the financial position of an enterprise that is useful to a wide range of users in making economic decisions.


Before getting into its merits, it’s important to include the corporate element and know what does corporate financial reporting mean. Corporate finance basically deals with the study of finance in corporations and companies. It is that part of finance which deals with sources of funding, the capital structure of corporations, the actions that management takes to attain profit maximization and wealth maximization, and analysis used to allocate financial resources.







Corporate Financial Reporting (CFR) is the process of preparing corporate financial reports. These corporate financial reports are the income statement, balance sheet, cash flow statement, statement of changes in shareholder’s equity /retained earnings, and also include the financial and accounting policies of the company. CFR is a periodical reporting mechanism, may be prepared on a monthly or quarterly basis or at the end of the year.


CFR involves the disclosure of financial information to the various internal management and external stakeholders about the financial performance and financial position of the organization over a specified period of time. These external stakeholders include – investors, creditors, public, debt providers, governments & government agencies.

Browse the CFR video






The concept of corporate financial reporting has gained much significance due to the expansion and growth of company form of organization, increased competition, and an increase in the information needs of the users. Corporate financial reporting is a system of communication between the management and the user-groups of the financial statements; in order to report the results of the business activities of a corporate enterprise and also to demonstrate the credibility, accountability, and reliability of its business performance.


Considering the number of stakeholders involved and statutory & other regulatory requirements, CFR has become a very important and critical task of an organization. It is a vital part of Corporate Governance. Reporting with Government and Authorities is no fewer tasks of continuous sustained compliance and governance, for instance- In the case of listed companies, the frequency of financial reporting is quarterly & annual.







The fundamental objective of corporate financial reporting is to communicate economic measurements of information about the resources and performance of the reporting entity useful to those having reasonable rights to such information and interest in the entity.


The annual financial statements of a company not only aid its management to regulate the prices of its goods and services but also help its external users in different ways such as existing and potential investors in evaluating their past decisions and making changes in their investment policies, creditors in assessing company’s worthiness, profitability and liquidity, and government in administering the system of taxing the companies.


In simple, CFR is to provide information about the financial position, performance, and changes in the financial position of the company, which helps a wide range of users in making economic decisions. The following are some bulleted points that CFR aims at providing and enhancing:


1. Information to the management for the purpose of planning, analysis, benchmarking and decision making


2. Information to investors, promoters, debt providers and creditors to enable them to make rational and prudent decisions regarding investment, credit, etc.


3. Information to shareholders & public at large in case of listed companies about various aspects of a listed entity


4. Information about the economic resources of an organization, claims to those resources (liabilities & owner’s equity) and how these resources and claims have undergone change over a period of time


5. Information as to how an organization is procuring & using various resources


6. Information to various stakeholders regarding performance management of an organization as to how diligently & ethically they are discharging their fiduciary duties & responsibilities


7. Information to the statutory auditors which in turn facilitates audit


8. Social welfare by looking into the interest of employees, trade unions & Government.






Specific to the CMA Final Curriculum in accordance with ICMAI, the paper covers a wide range of studies. Let’s have a gist of each study under the curriculum.


A. GAAP and Accounting Standards – As we speak of financial statements in CFR, we should be aware that there are prescribed standards as to how these financial statements have to prepare. Say, for instance, Section 133 of Companies Act, 2013 deals with Accounting Standards right before the financial statements under Section 134. Where in the reporting requires the compliance of Accounting Standards in preparation of Financial Statements. In this notion, this part of the study exclusively deals with the GAAP in India, Overview of Accounting Standards, IFRS, overview, and applicability of Ind AS.


B. Accounting of business combinations & restructuring – Corporate restructuring is on the verge of great changes in the industry, both organic and inorganic growth strategies are widely used by the companies. Thus the need for a spotlight for corporate actions and restructuring such as a merger, demerger, reverse merger, reconstruction, and the business combination has been exclusively dealt with in this study.


C. Consolidated financial statements– Reporting by holding company on its stand-alone and consolidated financial statements have been considered as a very crucial part of CFR. This part of the study deals with the accounting treatment, requirements, and respective Accounting Standards that govern them.


D. Developments in financial reporting and other items of reporting–Financial Reporting decades back and in modern-day has undergone a very drastic change be it the recognition of new accounting methodologies and new technical reporting requirements. This study emphasis the recent trends in financial reporting, valuation of shares, goodwill and financial instruments, share-based payments, and also XBRL Reporting, which has driven the reporting to a very new level of extended business reporting.


E. Government Accounting in India– This study is completely on Government Accounting. Though vast and kind of enormous subject, the key understanding is what much important. They take away is to learn what is Government Accounting and how it is different from other commercial accounting. It extensively introduces us to the various Authorities, Boards, and Standards that are part of Government Accounting such as C & AG, P.A.C, GASAB, IGAS, and IFGRS.



To conclude, Corporate Financial Reporting is very important from various stakeholders’ points of view. At times for large organizations, it becomes a very complex activity with compliance and governance but the benefits are far more than such complexities. A sound & robust financial reporting system across industries promotes good competition and also facilitates governance and transparency.




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May 8, 2021

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