Financial reporting means balance sheets, profit and loss statements, financial notes, and disclosures, and it has its own language. It’s the language used to communicate information about the financial condition of a company, be it a not-for-profit business, a state or local government, the guidelines are found in the GAAP: the Generally Accepted Accounting Principles that is the guideline that determines how financial reporting is done.
Financial reporting: balance sheets, profit and loss statements, financial notes, and disclosures are used to communicate information about the financial condition of a company, a not-for-profit, or a state or local government. Generally Accepted Accounting Principles (GAAP) are the guidelines—the grammar and the punctuation—that determine how that language is written.
GAAP provides principles on:
Recognition—what items should be recognized in the financial statements; such as assets, liabilities, revenues, and expenses.
Measurement—what should be reported in financial statements,
Presentation – what data should be included n the financial statements.
Disclosure—what information is most important to the users.
Investors, lenders, and anyone who uses financial information rely on the GAAP to make decisions about how to allocate their capital and to help financial markets operate efficiently.
Public Companies, State and Local Governments and many private companies, use GAAP-based financial reporting; especially those seeking to expand their business and/or considering going public, make their decisions.