Financial reporting provides a snapshot of the organization’s past performance and current position based on quantitative data.
Non-financial reporting provides a broader perspective of the organization’s present situation and future potential based on qualitative data.
Both types of reporting complement each other and provide a more holistic view of the organization’s value creation and impact.
Statement 2: Financial reporting is more regulated than non-financial reporting.
True. Financial reporting is subject to more rules and regulations than non-financial reporting. This is because financial statements have a direct impact on the decisions of external users who have a stake in the organization’s financial performance.
Therefore, financial statements must comply with the applicable accounting standards and laws that govern their preparation and presentation.
Non-financial reporting is less regulated because it is mostly driven by internal needs or voluntary initiatives. However, this does not mean that non-financial reporting is not subject to any standards or expectations.
Non-financial reporting must still adhere to the principles of relevance, reliability, understandability, and comparability that apply to any form of reporting.
Statement 3: Financial reporting is more objective than non-financial reporting.
False. Financial reporting and non-financial reporting are both subject to some degree of subjectivity and judgment. Financial reporting may seem more objective because it is based on numbers and calculations.
However, financial reporting still involves making assumptions, estimates, and choices that may affect the results and interpretation of the financial statements.
For example, the choice of accounting policies, the estimation of depreciation and impairment, and the recognition of revenue and expenses are all areas where financial reporting may involve subjectivity and judgment.
Non-financial reporting may seem more subjective because it is based on words and narratives.
