Question & Answer: In 250-300 words compare the reports managers use to those used in GAAP financial statements……

In 250-300 words compare the reports managers use to those used in GAAP financial statements. Typically, management reports are not included in financial statements issued to investors. Do you believe that investors should have access to managerial reports? If managerial reports were available to investors what would be the pros and cons of releasing such information?

Expert Answer

 

Management reports– This is a confidential report that is different from financial reports. In management report, company shows its strategies in getting revenues and profits in the future. This report is not available in public domain. Management report is for internal control and compliance purpose. It helps make prediction about the future growth of revenue and profit. It also includes the strategies to cope up with the competitors.

Difference between Financial report and Management report- Are as following-

  1. Management report is only for internal use while financial report is for public domain and investors.
  2. Management report is not mandatory to make but financial report is very important for each company.
  3. Company has to follow GAAP in making financial reports while in management report, GAAP is not needed.

Do you believe that investors should have access to managerial reports?

No, I believe that investors should not have access to managerial reports. Investors are of different types, some may use or misuse the information, provided in management report. This report is good for internal purpose, specially for CEO of the company in making strategies.

If managerial reports were available to investors;

Pros– Management report provides insight to investors. Investors get to know about company’s future plan and can invest into it accordingly. Investors can understand the management of the company and can make an overview and image of the company in their mind.

Cons– Management report is not available for investors as they may get to know confidential information and company’s actual situation. If company is going into loss that it does not want to tell its investors and investors come to know this truth, they will not invest in company’s shares.

Investors can misuse the information, given in management report. Company’s competitors will come to know about the new product launch or any other strategy, that is not good for company.

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