What is the difference between private and public company reporting?
A public corporation is a business that trades securities on common stock exchanges such as the New York Stock Exchange and Nasdaq. A private company is run by its owners and is not publicly traded. Shareholders of a private business, from time to time, receive the financial statements and are entitled to assume that the Company’s financial statements and footnotes are in accordance with GAAP. Otherwise, the chairman of the business’s chief executive officer should clearly warn shareholders that GAAP has not been followed in one or more ways. The content of an annual financial report of a private business is often minimal. It includes the three primary financial statements, the balance sheet, the income statement and the cash flow statement. There is usually no letter, photo or graph of the CEO.
In contrast, the annual report of a publicly traded company has more bells and whistles. There are also other requirements for reporting. This includes the Management Discussion and Analysis (MD&A) section, which presents the definition and analysis of top managers on the business’s profit performance and other significant financial developments throughout the year.
Earnings per share (EPS) is another requirement for public companies. Most public companies report a few more, but this is the only ratio required to report a public business. A comparable income statement of three years is also required.
Most public businesses make the necessary filings with the Securities and Exchange Commission, but they submit annual financial statements different from those of their shareholders. A large number of public companies include only confidential financial information, rather than comprehensive financial statements. They will usually refer to a more detailed SEC financial report for more detail.