Financial reporting is the production and transmission of information that discloses the financial activities of an organisation. Unlike management accounting, which provides information for internal management review and use, financial reporting is done for review by third party entities that have a financial interest in the organisation. These include current and potential shareholders, creditors such as banks and vendors, financial analysts, economists and government agencies.
The information is presented as financial statements that reveal, in monetary terms, the economic resources under management control. It is imperative that this information is presented clearly and concisely, leaving no room for misinterpretation.
Financial reporting is highly structured in the presentation of statements, and subject to far more rules than management accounting. The body of rules that governs financial accounting in a given jurisdiction is called International Financial Reporting Standards (IFRS) or IFRS for SMEs (Small and Medium Enterprises).