Accounting Business Reporting for Decision Making

220 Accounting: Business Reporting for Decision Making

The reporting period

As discussed previously, parties with an inherent interest in the financial performance of an entity need

to be informed on a regular basis as to the profit or loss generated by the entity. For example, an investor

who contributes capital to an entity would not want to wait until the entity is sold or wound up before

ascertaining whether the investment has been financially rewarding. Management need to have timely

information as they need to make informed decisions such as the price to charge for an entity’s products.

The financial statements assume that an entity is a going concern, but the life of the entity is divided into

arbitrary reporting periods, also known as accounting periods. For external reports, the convention is

that the arbitrary reporting period is yearly, and so the entity prepares financial statements at the end of

each 12 months (not necessarily a calendar year). For internal reports, managers may divide the life of

the business into time periods of less than one year. The reporting period to which the statement of profit

or loss relates should be prominently displayed.

Many countries require interim reporting. In Australia and the United Kingdom, most listed entities

are required to report financial results to the relevant securities exchange on a semi-annual basis. In con-

trast, the United States and Canada have quarterly reporting. As indicated by the reality check ‘Financial

reporting requirements of public hospitals’, the State Government of Victoria requires monthly reporting

by all public hospitals.

REALITY CHECK

Financial reporting requirements of public hospitals

Public hospitals and health services are required to provide monthly data on an accrual basis to the

State Government of Victoria, Department of Health. The information to be submitted is the statement

of profit or loss, balance sheet, performance indicators, monthly cash flow statement, notes and Chief

Executive Officer’s comments. This information provides the Department with information to monitor the

industry and evaluate the performance and viability of such entities.

Source: State Government of Victoria 2013, Accounting and financial policy in Victoria’s public hospitals,

http://www.health.vic.gov.au.