Financial Reporting and Disclosure
Expert-defined terms from the Certified Professional in Investor Relations course at London School of Business and Administration. Free to read, free to share, paired with a professional course.
Accountability refers to the responsibility of an organization to provide an acc… #
Related terms include transparency, compliance, and governance. In the context of financial reporting and disclosure, accountability is crucial as it helps to build trust among stakeholders, including investors, customers, and regulatory bodies. For example, companies are required to disclose their financial statements, including the balance sheet, income statement, and cash flow statement, to provide stakeholders with a clear understanding of their financial position and performance.
Accounting standards are a set of rules and guidelines that govern the preparati… #
Related terms include generally accepted accounting principles (GAAP), international financial reporting standards (IFRS), and financial reporting framework. Accounting standards provide a framework for companies to prepare their financial statements, including the recognition, measurement, and disclosure of financial transactions and events. For instance, accounting standards require companies to recognize revenue when it is earned, regardless of when the cash is received.
Accrual accounting is a method of accounting that recognizes revenues and expens… #
Related terms include cash accounting, matching principle, and materiality. Accrual accounting provides a more accurate picture of a company's financial performance, as it matches revenues with the expenses incurred to generate those revenues. For example, a company may recognize revenue from a sale when the product is delivered to the customer, even if the cash is not received until later.
Amortization is the process of allocating the cost of an intangible asset over i… #
Related terms include depreciation, impairment, and intangible assets. Amortization is used to expense the cost of intangible assets, such as patents, copyrights, and trademarks, over their useful life. For instance, a company may amortize the cost of a patent over its 10-year useful life, recognizing an expense of $10,000 per year.
Annual report is a comprehensive report that provides an overview of a company's… #
Related terms include quarterly report, interim report, and sustainability report. The annual report provides stakeholders with a detailed understanding of a company's financial position, performance, and prospects, as well as its governance and social responsibility practices. For example, the annual report may include information on a company's environmental and social impact, as well as its diversity and inclusion initiatives.
Asset is a resource owned or controlled by a company that is expected to generat… #
Related terms include liability, equity, and valuation. Assets are recognized on the balance sheet when they are acquired or generated, and are measured at their cost or fair value. For instance, a company may recognize an asset when it purchases a piece of equipment, or when it develops a new product.
Audit committee is a committee of the board of directors that oversees the audit… #
Related terms include internal audit, external audit, and audit risk. The audit committee is responsible for selecting and overseeing the external auditor, as well as reviewing the company's internal controls and risk management practices. For example, the audit committee may review the company's financial statements and internal controls to identify areas of risk and improve the accuracy and reliability of the financial statements.
Auditor is an independent professional who examines a company's financial statem… #
Related terms include audit report, audit risk, and material weakness. The auditor provides an independent opinion on the fairness and accuracy of a company's financial statements, which helps to build trust among stakeholders. For instance, the auditor may identify material weaknesses in a company's internal controls, which could impact the accuracy of the financial statements.
Cash flow is the inflow and outflow of cash and cash equivalents over a period o… #
Related terms include cash flow statement, liquidity, and solvent. Cash flow is an important metric for evaluating a company's ability to generate cash and meet its financial obligations. For example, a company may generate cash from operating activities, such as sales and collections, and use it to invest in new equipment or pay off debt.
Certified Professional in Investor Relations (CPIR) is a professional certificat… #
Related terms include investor relations, financial communications, and capital markets. The CPIR certification demonstrates a professional's knowledge and skills in communicating with investors and other stakeholders, as well as their understanding of financial reporting and disclosure requirements. For instance, a CPIR professional may develop and implement an investor relations strategy, including the preparation of financial reports and presentations.
Consolidated financial statements are financial statements that combine the fina… #
Related terms include subsidiary, control, and non-controlling interest. Consolidated financial statements are used to evaluate the financial performance and position of a group of companies, rather than individual companies. For example, a parent company may consolidate the financial statements of its subsidiaries to provide a comprehensive view of the group's financial position and performance.
Corporate governance refers to the system of rules, practices, and processes by… #
Related terms include board of directors, executive compensation, and shareholder value. Corporate governance is essential for ensuring that a company is managed in a responsible and ethical manner, with the interests of stakeholders in mind. For instance, a company's board of directors may establish a corporate governance framework that outlines the roles and responsibilities of the board, executive management, and shareholders.
Cost of capital is the cost of raising funds from debt and equity, including<… #
Related terms include weighted average cost of capital (WACC), capital structure, and dividend policy. The cost of capital is an important metric for evaluating investment opportunities and determining the appropriate capital structure for a company. For example, a company may use the WACC to evaluate the feasibility of a new project, or to determine the optimal mix of debt and equity financing.
Disclosure is the process of providing information to stakeholders about a compa… #
Related terms include transparency, accountability, and compliance. Disclosure is essential for ensuring that stakeholders have access to accurate and timely information about a company's financial performance and position. For instance, a company may disclose its financial statements and management's discussion and analysis to provide stakeholders with a comprehensive understanding of its financial performance and position.
Financial analysis is the process of evaluating a company's financial performanc… #
Related terms include financial modeling, forecasting, and valuation. Financial analysis is essential for investors, analysts, and other stakeholders to evaluate a company's financial performance and make informed decisions. For example, a financial analyst may use ratio analysis to evaluate a company's liquidity, profitability, and efficiency.
Financial reporting is the process of preparing and presenting financial informa… #
Related terms include financial disclosure, transparency, and accountability. Financial reporting is essential for ensuring that stakeholders have access to accurate and timely information about a company's financial performance and position. For instance, a company may prepare and present its financial statements, including the balance sheet, income statement, and cash flow statement, to provide stakeholders with a comprehensive understanding of its financial performance and position.
Financial statements are formal documents that provide a comprehensive view of a… #
Related terms include financial reporting, accounting standards, and auditing. Financial statements are essential for stakeholders to evaluate a company's financial performance and position, as well as its prospects and risks. For example, a company may prepare and present its financial statements to provide stakeholders with a comprehensive understanding of its financial performance and position.
Generally accepted accounting principles (GAAP) are a set of rules and guideline… #
Related terms include international financial reporting standards (IFRS), accounting standards, and financial reporting framework. GAAP provides a framework for companies to prepare their financial statements, including the recognition, measurement, and disclosure of financial transactions and events. For instance, GAAP requires companies to recognize revenue when it is earned, regardless of when the cash is received.
Going concern is an assumption that a company will continue to operate for the f… #
Related terms include liquidity, solvency, and viability. The going concern assumption is essential for preparing financial statements, as it allows companies to defer the recognition of certain expenses and revenues. For example, a company may assume that it will continue to operate for the foreseeable future, without the intention or necessity of liquidation, and therefore recognize revenue and expenses accordingly.
Governance refers to the system of rules, practices, and processes by which a co… #
Related terms include corporate governance, board of directors, and executive compensation. Governance is essential for ensuring that a company is managed in a responsible and ethical manner, with the interests of stakeholders in mind. For instance, a company's board of directors may establish a governance framework that outlines the roles and responsibilities of the board, executive management, and shareholders.
Income statement is a financial statement that presents a company's revenues and… #
Related terms include balance sheet, cash flow statement, and financial reporting. The income statement is an essential tool for evaluating a company's financial performance, as it provides a measure of its profitability and return on investment. For example, a company may report an increase in revenue and a decrease in expenses, resulting in an improvement in its profitability.
Intangible asset is an asset that is not physical in nature, including pa… #
Related terms include amortization, impairment, and valuation. Intangible assets are recognized on the balance sheet when they are acquired or generated, and are measured at their cost or fair value. For instance, a company may recognize an intangible asset when it develops a new product or acquires a patent.
Internal control is a process designed to provide reasonable assurance regarding… #
Related terms include risk management, audit committee, and compliance. Internal control is essential for ensuring that a company's financial statements are accurate and reliable, as well as for preventing and detecting fraud. For example, a company may establish internal controls over financial reporting, such as segregation of duties and authorization procedures, to ensure the accuracy and reliability of its financial statements.
International financial reporting standards (IFRS) are a set of accounting stand… #
Related terms include generally accepted accounting principles (GAAP), accounting standards, and financial reporting framework. IFRS provides a framework for companies to prepare their financial statements, including the recognition, measurement, and disclosure of financial transactions and events. For instance, IFRS requires companies to recognize revenue when it is earned, regardless of when the cash is received.
Investor relations is the process of communicating with investors and other stak… #
Related terms include financial communications, investor outreach, and capital markets. Investor relations is essential for building trust and credibility with investors and other stakeholders, as well as for providing them with accurate and timely information about a company's financial performance and position. For example, a company may establish an investor relations program to provide investors with information about its financial performance and position, as well as to engage with them and respond to their inquiries.
Liquidity refers to a company's ability to meet its short #
term obligations, including its ability to generate cash and liquid assets. Related terms include solvency, cash flow, and working capital. Liquidity is an essential consideration for companies, as it affects their ability to meet their short-term obligations and maintain their operations. For instance, a company may have sufficient liquidity to meet its short-term obligations, but may face challenges in generating cash and liquid assets in the long term.
Materiality is a concept that refers to the significance of a financial transact… #
Related terms include accounting standards, disclosure, and transparency. Materiality is essential for ensuring that stakeholders have access to accurate and timely information about a company's financial performance and position, as well as its prospects and risks. For example, a company may disclose material information about its financial performance and position, such as significant changes in its revenue or expenses.
Net income is a measure of a company's profitability, calculated by subtracting… #
Related terms include earnings per share, dividend policy, and retained earnings. Net income is an essential metric for evaluating a company's financial performance, as it provides a measure of its profitability and return on investment. For instance, a company may report an increase in net income, indicating an improvement in its financial performance.
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balance-sheet financing is a type of financing that does not appear on a company's balance sheet, including leases, guarantees, and contingent liabilities. Related terms include financial reporting, disclosure, and transparency. Off-balance-sheet financing can have a significant impact on a company's financial position and performance, and is therefore subject to disclosure requirements. For example, a company may disclose off-balance-sheet financing arrangements, such as leases or guarantees, to provide stakeholders with a comprehensive understanding of its financial position and performance.
Quarterly report is a report that provides an update on a company's financial pe… #
Related terms include annual report, interim report, and financial reporting. The quarterly report provides stakeholders with timely information about a company's financial performance and position, as well as its prospects and risks. For example, a company may report an increase in revenue and a decrease in expenses in its quarterly report, indicating an improvement in its financial performance.
Risk management is the process of identifying, assessing, and mitigating risks t… #
Related terms include internal control, audit committee, and compliance. Risk management is essential for ensuring that a company is prepared to respond to potential risks and opportunities, and to maintain its financial stability and performance. For instance, a company may establish a risk management framework to identify, assess, and mitigate risks that could impact its financial performance and position.
Segment reporting is the process of reporting financial information by business… #
Related terms include financial reporting, disclosure, and transparency. Segment reporting is essential for stakeholders to evaluate a company's financial performance and position, as well as its prospects and risks. For example, a company may report financial information by business segment, providing stakeholders with information about its operations and performance in different segments.
Solvency refers to a company's ability to meet its long #
term obligations, including its ability to generate cash and liquid assets. Related terms include liquidity, cash flow, and working capital. Solvency is an essential consideration for companies, as it affects their ability to meet their long-term obligations and maintain their operations. For instance, a company may have sufficient solvency to meet its long-term obligations, but may face challenges in generating cash and liquid assets in the short term.
Stakeholder is an individual or group that has an interest in a company's financ… #
Related terms include investor relations, financial communications, and corporate governance. Stakeholders play a critical role in a company's success, and are therefore essential to consider in financial reporting and disclosure. For example, a company may engage with stakeholders to provide them with information about its financial performance and position, as well as to respond to their inquiries and concerns.
Sustainability reporting is the process of reporting on a company's environmenta… #
Related terms include corporate social responsibility, environmental sustainability, and social responsibility. Sustainability reporting is essential for stakeholders to evaluate a company's ESG performance, as well as its prospects and risks. For instance, a company may report on its sustainability practices and performance, providing stakeholders with information about its environmental, social, and governance practices.
Transparency refers to the quality of being open and honest in financial reporti… #
Related terms include disclosure, accountability, and compliance. Transparency is essential for building trust and credibility with stakeholders, as well as for providing them with accurate and timely information about a company's financial performance and position. For example, a company may disclose material information about its financial performance and position, providing stakeholders with a comprehensive understanding of its financial performance and position.
Valuation is the process of determining the value of a company or its assets, <b… #
Related terms include financial modeling, forecasting, and discounted cash flow. Valuation is essential for investors, analysts, and other stakeholders to evaluate a company's financial performance and position, as well as its prospects and risks. For instance, a company may use valuation models to determine its value, providing stakeholders with information about its financial performance and position.
Working capital is the difference between a company's current assets and current… #
Related terms include liquidity, cash flow, and solvency. Working capital is an essential consideration for companies, as it affects their ability to meet their short-term obligations and maintain their operations. For example, a company may have sufficient working capital to meet its short-term obligations, but may face challenges in generating cash and liquid assets in the long term.