What are the main objectives of financial reporting?

The primary objective of financial reporting is to provide a clear and comprehensive view of a company's financial position, performance, and cash flows. This information is crucial for a wide range of stakeholders, including investors, creditors, regulators, and management, as it helps them assess the overall health and viability of the entity.

Financial position refers to the company's assets, liabilities, and equity at a specific point in time, typically reflected in the balance sheet. Performance relates to how well the company has operated over a period, generally captured in the income statement, showcasing revenues, expenses, and profits. Cash flows summarize the inflows and outflows of cash, highlighting how well the company generates cash to meet its obligations and fund operations.

While compliance with tax regulations, assessing management effectiveness, and predicting future earnings trends are important aspects of financial analysis, they are not the primary objectives of financial reporting. The core purpose remains centered on providing a transparent and accurate representation of a company's financial health that users can rely on for decision-making.