Statutory Financial Statements: Pros And Cons
There are so many laws laid down by the government that one needs to abide by. Some are not necessarily laws per se, they just have to do with the financial status of your establishment, company, or organization. It allows for these government legacies to be able to report and also keep an eye out on all that you do. It is in this light that they established statutory financial reporting.
We would be defining terms about statutory reporting.
What is statutory reporting?
This can be defined as obligatory compliance with submitting financial and non-financial information to a government agency. In addition to this, each industry has its own set of laws, regulations, and regulatory bodies that instruct or that are in charge of these reports.
What is a statutory report in financial statements?
These are your company’s official financial statements that you will submit to the regulatory bodies, across the jurisdictions. These statements are the annual, quarterly, or bi-annual financial statements brought together by you for your company.
These statements include:
1. Income statement which includes the revenue made from operations, business expenses, your profit or loss, income tax, and earnings made per share.
2. Balance sheet which includes the details of all your company’s assets, liabilities, and shareholder equity.
3. Notes to financial statements include your accounting policies, as well as the inferences made and modes of calculating the key figures in the financial statements.
4. Report of the statutory auditor which entails the verification document by a statutory auditor.
Why are they important?
Their importance is more than you can think of and they are
1. To help track the financial health of your company and measure it with that of your peers
2. Mitigate any legal and operational risks relating to any regulatory non-compliance across jurisdictions.
3. To help you with information on your company’s financial status, investments, loans, and executive compensation for your stakeholders and regulators.
4. To develop effective strategies that would be used to counter and achieve both short and long-term financial goals.
5. Improve your company’s corporate authority.
Now let’s discuss the pros and cons of addressing the statutory financial statements of your company.
1. It gives you a detailed and consolidated view of your company’s all-around
2. It aids in forecasting your company’s financial performance by leveraging historical data
3. Allows for transparency between the regulatory authorities and your company.
4. You can obtain funding and loans quicker by providing audited financial statements of your company
5. It provides you with updated financial statements of your company
1. It will increase your company’s exposure to liability risks, fines, and litigation due to the non-submission of your statements
2. Harms the transparency between your company and the shareholders
3. You spend more time and money on due diligence for both internal company management and your prospective investors